BREWERY YEAR

New Zealand Herald, Volume LXXIII, Issue 22461, 3 July 1936, Page 15

BREWERY YEAR

dominion, company

CONTINUED EXPANSION

labour laws welcomed

Satisfaction with the progress of the company and the continued expansion in the demand for .its products was expressed at the annual meeting yesterday of Dominion Breweries, Limited. J- Stevens, chairman of directors presided over nn attendance of about 40 shareholders. In moving the adoption of the report an rl balance-sheet. Mr. Stevens said: "At previous meetings 1 was optimistic enough to forecast that shareholders rould receive an adequate reward for their enterprise and support of the company. That optimism was warranted, ami to-day, as to the future, it is greater than ever before. In this opinion 1 have the endorsement of the managing director, Mr. H. J. Kelliher. and the director. The year's results follow the early policy decisions recommended by Mr. Kelliher and which received my cordial endorsement when I joined the board of directors. Since I have been chairman this policy has been consistently followed, and is reflected in the company's present satisfactory position. "At all times Mr. Kelliher advised tlw company that success depended oji three fundamental considerations. Firstly, the company must be prepared to supply the public with a product that met the appreciation of the consumer; secondly, it must adopt an energetic sales policy ; and, thirdly, guaranteed outlets must be obtained to •secure the full benefit of the excellence of the product offered for sale and the sales policy adopted. System oi "Tied" Houses

"The sale of beer and spirits represents problems much greater and more varied than the problems usually experienced in the marketing of ordinary commercial lines. The existing system of 'tied' houses has'never permitted the proper exploitation of the products of our own brewery on their merits. No matter how superior in quality, there could be no adequate outlet for these products under a system^which allowed a monopoly to control 75 per cent of all hotels, and. at the same time, to exercise a strong influence over the remaining hotels. In view of the fact that, in theory at least, the 'tied' house in New Zealand is illegal, the directors were reluctant to participate in the control of the trade "of licensed hot-els. "However, they really had no option, as the only alternative to the adoption of a policy of controlled hotels would have left the company without an outlet and without a market for its products. Even though the system may be undesirable in principle, its effectiveness is shown by the fact that the bulk of our output is absorbed by our own hotels, and. what is more, this outlet has been definitely secured for a long number of years. Open Competition Wanted "The credit for the successful issue of this policy is in great measure due to its managing 'director, who conducted the negotiations to acquire the various hotels and made the necessary financial arrangements, which have not only helped to consolidate the position of the company, but have greatly contributed to the success of the year's working. As long asr-the present system remains in existence, the company must, of necessity, adopt the same policy as its competitors, but the directors would certainly prefer a system under which our products would be sold on their merits and in open competition with the products of our competitors. Control of Hotels Necessary "Shareholders will appreciate that the control of hotels has been forced mi the company by the intensive competition of its competitors. Hitherto, the company has only leased hotels for limited terms but recent competition has..compelled it to take more definite measures to protect its trade and outpi'it. Subsequent to the close of accounts, three major transactions in the nature of the purchase of freehold hotels were arranged. These transactions all affect key hotels. In addition, the company has secured the leases of several other hotels, notably the St. George Hotel, Wellington. The control of this hotel will enable the company to introduce its beer -and other products into the Wellington territory, and the directors anticipate the development of very satisfactory trade in the Wellington province. All the company's hotels are working on a profitable basis and on present trade returns represent very satisfactory investments. Record in Sales

"The sales of the company's brewery products, as well as the sales of wines and spirits,, represent a distinct improvement in trade, and both are a record for the company. The increase in the brewery turnover is approximately 40 per cent .above that of last Tear. Even greater returns would have been obtained but for the unfavourable summer season experienced. Improved trade outlets, and increased spending power in the hands of the public should enable the company to maintain and extend this improvement. The demand for_ the company's products is being maintained on levels considerably in ad vance of those experienced at this time Inst year. "The directors welcome the general restoration of all wages cuts and the decreased working hours fixed or to be arranged under the legislation of the present Government. The company has to its credit the record of being the first company to announce publicly the restoration to all employees in -receipt of less than £.300 a vear of the full cut of 10 per cent in wages levied under the general order of the Arbitration Court. The directors are certain that improvements in business conditions must follow the receipt by the general body of iva tic earners of higher rates of pay and better conditions. All businesses must improve w 'th the restoration of community spending power. Extensions to Brewery . "At the present time, further extensions are planned at the brewery and certain up-to-date plant is on order. It js the directors' intention that the brewery shall be kept effective and up- ( v 0 nnr ' truth the model brewery °t New Zealand. The directors recogDiso the opportunity still open to the company for the profitable use of further capital. The brewery extensions ar " planned to increase the earning capacity of the company. Likewise, tho Purchase of. the freehold premises already referred to, and the control of further hotels, open up profitable ® ven, ' es for the use of additional capi- •+ ~ le directors arr> of opinion that "ill he more Rntsifnctory for the rompanv to finance its operations by share capital in preference to loans through 'j bankers or by mortgages. Should 10 directors decide to take definite s , ie Ps in th is direction, shareholders will ° e given first opoortunity to partici P a te in any new share issue. Details of Accounts , accounts for the year balance J the record figure for the company Land and buildings at jv °>.l7c show an increase of €l7lO ! nn K the year the -brewery has been Urged by tbo erection of a large and the cost of this 'addition sr°unts5 r °unts for t|| ( , increase in the valu<i.l°'' °f land and buildings. Similarly, fit't an< ' ,n;u 'binery and furniture and £i~"to S - :i ~ r °uped in one total at pv I sums have been ".Pcndcd dnr'ng the year in brewery ij " nt a U'! machinery, and, at tho same ne > further purchases have been made

in the way of hotel furniture and fittings. Stocks at £33,106 show an increase of £10,415, and_ sundry debtors have increased by £3784. Both these increases are evidence of the company's expanding trade. Hotel leases, investments and advance payments are approximately £2025 higher than last vear. Goodwill remains as before, and cash iu hand and in bank amounts to £11,866.

"On the liabilities side of the balancesheet. paid capital shows an increase of £-'{0,312. The whole of an issue of 40,000 preference shares made early in the financial year was taken up by shareholders. At balance date, £9642 ol this capital remained to be called up Sundry creditors amount to £18,083, while reserve for income tax is £BOOO Profit and Loss Figures

"In the profit and loss account, gross prolit shows an increase of £26,108. After providing substantial sums by way of depreciation, and, in addition, writing C 2992 oil brewery plant for obsolescence, and after providing for income tax. the net prolit is £15,223, which shows an improvement of over £7OOO and is approximately 14 per cent of the paid up capital. The total_ sum available for appropriation is £17,011. "The directors recommend that a dividend of 6J per cent should be paid on ordinary shares and a dividend of 6.1 per cent per annum should be paid on the amount paid up from time to time on preference shares. To pay these dividends requires £5819. The directors recommend the distribution of only 40 per cent of the net profit earned during the year. They further recommend tin; transfer to general reserve of £IO,OOO and that the balance of £1221 be carried forward.'' Greatly Increased Turnover 111 seconding the motion, the managing director. .Mr. Kelliher, said: "I he satisfactory results for the year are due to the greatly increased turnover in the company's business. The total pur. chases, for instance, increased from £56,735 in 1935 to £122,055 in 1936 and the total sales increased from £127,235 to £179,008. The increase of just on £52,000 in the company's sales represents 40 per cent over the previous year, and is the most gratifying feature in the balance-sheet. The main reasons for this remarkable improvement in the company's turnover are, in the first place, tlie ever-growing popularity of its products owifig to their high and uniform quality and. secondly, to a very effective advertising campaign. "This increased turnover is being more than maintained, and the trading figures for April, May and June of this year show an increase of just on 30 per cent over those for the corresponding months of last year. The benefits from this increased business are reflected bv the gross profit, which increased from £36,405 in 1935 to £62,648 in 1936, an increase of just on 60 per cent. Increase In Capital "On the net profit shown by the year's working, the company was in a position to pay quite easily a dividend of at least 8 per cent, but the directors decided to adopt a prudent course, especially as the additional capital can lie profitably employed in the company meanwhile. An indication of the development and rapid progress made b.v the company is afforded by the company's pay-roll, which amounts to £1235 a week, or the equivalent of over £64.000 a year. "The companv's paid up capital on March 31, 1936. stood at £108,519. which represents an increase of £30,312 This increase in capital, combined with the improvement in the year's trading, has placed the company in a remarkably sound financial position. Capital expenditure on buildings, machinery, plant, etc., has increased the value of these assets by £14.500. Stocks on hand are greater by £10.414. The value of hotel leases has increased by £2026. The liabilities of the company b.v way of sundrv debtors have been reduced by £11,895, while the liquid assets such as debtors and cash on hand and in bank, have increased by £17,170. These total improvements in the company s financial position brought about djirimr the last 12 months amount to £57,000 Extension of Operations "The company now owns or controls the following hotels: —In Auckland: Central, Commercial, Royal, Market, Prince Arthur. Shakespeare and Freemaiis; in Wellington, the Hotel St. George; Napier, the Masonic; Thames, the Exchange and the Junction: Devonport, the Masonic; Wailu, the Sterling and the Commercial; Onehunga, the Prince Albert; Papakura, the Globe; Huntly, the Huntly; Towai, the Towai: Kati Kati. the Talisman; Puhoi, the Puhoi; Taihape, the New Taihape; Wangnnui, the Rutland; Frankton Junction, thj Frankton Junction; and Kawakawa, the Junction. "The Hotel St. George, Wellington, is one of the latest hotels acquired by the company and the returns so far have been very satisfactory. The hotel will be of great assistance to the company in extending its operations further south. In this connection, the reception given our products in Wellington is most gratifying. "There are ample signs everywhere that trading conditions arc improving steadily, and it is only reasonable to assume that the company will prosper and improve with them. Dominion Breweries, Limited, has greatly increased in strength and importance and to-day is taking its place in the forefront' of similar undertakings in New Zealand. The 40-Hour Week "A certain amount of apprehension appears to exist in certain quarters in connection with the 40-hour working week. The reduction in working hours will result, of course, in an increased cost for labour, but at the same time should bring about a considerable increase in employment. In our company, for instance, it' will mean the employment of something like an additional 30 hands. The directors feel no concern on this score. On the contrary, it will be a welcome change to be able to find work for additional men instead of having constantly to decline applications for employment. I feel convinced that matters will adjust themselves very quickly and any increase in costs will be more than compensated for by greater purchasing power and better and brighter conditions generally. "1 appreciate the loyalty and cooperation of the staff at the brewery, the offices, the stores, as well as at the various hotels. Throughout the year everything worked very satisfactorily and harmoniously and much of the company's success is due to this fact. 1 would like to express my appreciation and also to congratulate those shareholders who were loyal to the company during the years of great difficulties—it is most gratifying to know that their loyalty and confidence have been rewarded." The accounts, which were reviewed in the Herald on Juno 13, were adopted, the retiring directors, Messrs. Stevens and W. 15, Urittain, being re-elected A proposal to increase the directors' fees was unanimously approved.