BUSINESS AND BOODLE

NZ Truth, Issue 604, 13 January 1917, Page 4

BUSINESS AND BOODLE

BY "CAMBIST"

Shareholders m companies are invited to send the balance-sheets and reports of the companies they are interested m to "CAMBIST," c/o "N.Z. TRUTH," for review. The prospectus of any new company is also requested lor criticism. \

TAIERf AND PENINSULA MILK SUPPLY CO., LTD.

'...■'»."■ . ■ . ... Thirty-second Annual Report and Balance-sheet

"Cambist" is sorry to remark that .this huge company seems to be unable to get upon 'sdund business lines. Two years agfb the concern came before its shareholders regretting it had made a loss pf £612 on the year's transactions. The renbrt put the blame for the failure, on the backs of the misguided "strikers" and then passed on to 6ay that there would be no dividend for the shareholders. This writer took good care to point out how hollow the whole thing was, and he is not at all st^^ed-io^.;flji4i'tMt,\ ; \forjV.;the last season, the; c'ompany;is' r 'agtLln without a proflt'balaneereyeh though the opportunities for earning tine were extraordinarily good. At no time have prices for butter-fat been so high, but the only result ls\ A LOSS OP £1486 for the year. Whether this is all the loss, this writer cannot say. The auditors* certificate does not help him. There is reference m the document "to letter accompanying" which has not been referred to-in the report signed by the chairman. "Cambist" would again draw attention to the fact that the directors do not have their names printed on the- document setting; forth the report and balance-sheet . No one can gather from it who the directors are. The balance-sheet does not bear the signature of the chairman, or any director, nor does it even carry the signature of the secretary. All that is given is the certificate of the auditors, William Brown and Co. It strikes the writer that such modesty on the part of the directors and secretary is quite out of place. Can it be that these persons are ashamed of the poor results shown, or do they think that any sort of treatment is good enough for the shareholders? In the opinion of "Cambist" the whole get up of the report and the bal-ance-sheet is paltry m the, extreme, ret, this is not a small affair. It is I one of the largest dairying concerns m the Dominion. Two years ago it produced 1630 tons of butter and 400 tons of cheese. This year the output was only 707: tons of butter and 600 tons of cheese. The chairman blames the "UNFAVORABLE CLIMATIC CONDITIONS which prevailed In North Otago" for the heavy falling off m supplies of butter-fat and consequent reduction m the output. "Cambist" is satisfied that a good deal of truth is contained m the reason given,: but, nevertheless, he is quite unable to fully agree with,' the explanation. He never takes these matters for granted. He requires proof. Proof m dairying matters can be easily if the companies provide statistics of the business. This company treats its shareholders and suppliers m ft very offhand manner, for it does not seem to think that the annual report should be of service m the matter of letting the , shareholders know what business passes at its numerous stations arid creameries. There can be no doubt that with such information at hand it might be found' that some v of the branches were being run at a loss. When such is the case, one branch may be run at the cost of another. It can be easily understood that such a condition of affairs conduces to poor results m the business. The shareholders and suppliers do not receive fair j treatment. In one cose there Is no Ldividend, and m the other,' the price ■ paid for the butter-fat does not reach the maximum. Looking at the reports of th'lß company for a few years back, one is forced to conclude that the business is capable of improvement, but it is quite beyond the 'powers of any critic to point out where the inefllc- ' lency is located, And no wonder. Who could "make head or tail" of <he anI nual effusions which are misnamed tho | "DIRECTORS' ANNUAL REPORT." These gentlemen do not go into details when preparing the annual report for the shareholders, although the matter | for a concise and sensible review of the whole business should bo available m ! the accountant's department. So long j as the shareholders accept the paltry I documents which are annually handed to them, co long must they expect to find what they find. While such uninforraativo methods prevail, the suppliers as a natural result will receive less for their butter-fat than others m the same line of business. If the economies of a properly managed dairying company .ire curefully attended to, it is surprising how uniform the not result bocomes. Tho largor the business is, the more necessary for these economies to be rigidly carried out, and no suppllor should be content unless quite satisfied by documentary evidence that all unnecessary loss m working Is eliminated from the business. Handling such large quantities aa this company does, tho net results to both shareholders and suppliers should be many points better than they havo been. Nothing could be worse for shareholders than tho "passing" of tho dividend. Tho Bharc.holders of this concern should 'lay the whip" upon whoever i« responsible for the manajr**ment of the capital . Fancy having £31, 000 Hunk m iho bu.sinemj anil NOT GETTING ONE PENNY OF INTEREST upon tho investment, and what fa worse, suppliers recelvo Jess for their i butler-fat than Its market value. | Nothing better could bo •lukcn as an inj dlcatioii lhat a radical change In needled. The report dot's not way who coinI/Oso the Board, or who are the tnanußcrs, and the uccouius are so sot out that nolhlnjj can bo gathered an to tho cost of running the bu.sincss. WJth regard to tho latter, a larjja retail milk l.rado Li being carried on, hut "Ciim-bi.-'l" t'.'innol say whether .-it a profit, or t;ot . Writer v.'ill not trouble him. <r <'if | *.v»Mt {i:** iu<:nf> In t!u> balnnce-nhoot on i t» ! .-e ncMjion. Hi' is qulio contrnl with } what ho has written rcßnrdlnp tho ■ management, for tho results are poo»,* I .■■■ hi" vMrenu; uml roll net no credit ; -.vn u^vor upon !hr*,ho:ird o' tlu- oorrjj t.n.'iV. Where :ui much m UUUlOti it I would I.'*? fniitU'S:* lo f-ml'uric upovi a "!<u<v^;i:!>r <-"iii petition." Th<> oiit : ;i;ukUln(T {'.-:< tv- In lhr» !>a>-ft.m:ft-!Mi<-H,i« ''i l ' l>fiU' uvcnJraft {:rnnt« I'd by '.lif Js'iUyii.iS Itimi; uf New '/.vuUi'.ul. Thfc Htim In £U.? 52. It In r«--m:ii;:.ibJ<> to 'i'l.l that Ci'.'dK r.m b«> !Q ffiraly pMalispd from v b.-u-.k. Tho NaU rt nal tnu»t ba fuiiy offwe ot ih«

position this company so often finds M.tself m, viz., unable to pay dividends upon the paid-up capital, and yet it goes on finding cash for the board to play with. No doubt THE BANK IS WELL SECURED and does not need to worry about the soundness of the policy underlying the advance. What "Cambist" desires to make clear is this, a bank may have ample security for an advance, but It is not. sufficient.. It may injure- a company to let a muddling board of directors have capital advanced to it, and '.when a iCoinpany cannot pay a paltry 5 per dent, dividend upon its paid capital, the amount of injury such an advance is responsible for is made pretty well plain. What does the National Bank get for the accommodation? The accounts do not give the faintest Information upon the point. ; While the company may pay anything from 6 per cent, to 8 per cent, for its overdraft, it cannot pay 5 per cent, to its shareholders. This writer cannot say what rate the National Bank is getting on the overdraft, for /the ac'i counts "won't let him." The informa- { tlon is hidden away m the sum of (£1295 10s lid for interest, discounts, and commission, as per profit and loss account. In the case of the Toieri and Peninsular Milk Supply Co., Ltd., the directors received the sum of £262 for "fee 3," and were allowed £120 for "travelling" expenses. The total of £383 therefore has been paid to a, board which trots along at balance time to tell the shareholders there is NO DIVIDEND FOR THEM, arid that the sum of £1486 has been ■lost m the year's business. "Cambist" considers this the limit. The shareholders who -have over £34,000 sunk m the business are paying for nearly £400 worth of "fees" and "expenses." 'Is it not tfane that some people -were ' asked what was the value of their . al- ■ leged services to the company? Another point, it Is absolutely necessary that a proper profit and loss account should be furnished to the shareholders, instead of the jumble which Is given to them this year. The company should let the suppliers see whe- • ther the retailing of milk, butter, and I cheese was a paying or losing business, j and there should be separate accounts •showing the resultß made' from the manufacture of butter and cheese. With so wide a margin of profit (or loss) as these branches of dairying produce at present, it is absolutely neci essary for the directors to be candid m •stating the exact position of the company's operations. The point is, where 'has the £14SC been lost? Does the l "peddling" of milk result m profit? I How about the manufacture of cheese? ,} What about the returns from the butj ter manufacture? In the three items : mentioned it might be found that one jor ether was the causa of the debit •: which the year's work reveals. Why } not let the struggling suppliers know j the position? "Cambist" has received isonie , | STRONGLY WORDED LETTERS j from both shareholders and suppliers ) regarding the poor results shown by jthe company for this year. All h« hoa j to say Is that the persona directly interested should protest against the "secret system" which the published figures show to exist. For the future j the balance-sheet should be properly set out, giving the fullest details. The profit and loss account also is sadly In need of reform. Tn© different branches of the business require to be shown separately, and the net results plainly set forth. The practice of lumping Items under one heading' should be for ever done away with. In a word, what is wanted is a document "that he who runs may read." That 'would be vastly better than having to "think hard" over every line, and m the end lay down the papers with a well founded suspicion that "the half had not been told.' 1 •If the climato conditions of the last year really prevented the company from making a profit, the directors could have "proved Jt up to the hilt" by simple candid statements m tho accounts. By failing to provide the candid form of accounts, one may bo pardoned if the company is asked if it makes no blunders m THE SELLING OF ITS PRODUCTS? How much cheese wo 3 sold to the Imperial Government? What methods were adopted In disposing of the,butter? At any rate it was a- bad year, whatever the causo for tho poor results may havo been. For the sako of tho toiling suppllors, and tho disgruntled .shareholders, lot It ba hoped that bettor times will come. Tho position for 1915-1916 Is not ono to give much joy. No "divvy." Low price for butter- fat.