THE TIDE OF PROSPERITY

NZ Truth, Issue 1181, 19 July 1928, Page 16

THE TIDE OF PROSPERITY

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Devonport Steam Terry Co., Ltd., In Calmer Waters KEEPING OFF FINANCIAL SHOALS

(By "Fiat Lux.") The tide of prosperity is flowing strongly for the Deoonport Steam Ferry Company, Limited, according to its latest accounts, published for the year ended April 30, 1928, when the net profits proved to be £2000 better than 1927.

HTHE accounts m review make very 1 good reading, indeed; m these evolutionary days which affect transport more than any other service. •'■'"■. A very large portion of the Queen City's business population lives over THE harbor, where the building of residential suburbs proceeds apace, receding farther and farther from the waterfront with the passage of years. This has necessitated a constant readjustment of land transport to act as feeder to the cross-harbor ferries. As this company is now reputed to be m control of both land and sea services, it is possible for it to develop the two services side by side, thus providing and controlling continuous transport from the cross-harbor home, to" the ferry tee at the foot of Queen Street. The purchase by this company of the transport interests (other than tramway) of the Takapuna Train and Ferry Company, Limited, called for the provision of £40,000 m cash, plus £5759

referred to, but the point was surely of sufficient importance to warrant some reference to it m the directors' published report. The Devonport Steam Ferry Co., Ltd. Statement showing earnings, dividends, etc. \ , Year Net Profit Transfer 7% p.e. to reserves dividend 1923 9,406 1,500 7,721. 1924 9.143 1,550 7,818 1925 9,420 1,550 7,818 1926 9,854 2,050 7,818 1927 9;288 " — 9.251 1928 11,235 — 11,129 Totals £58,346 6,650 51,555 Reserves, 1922 . .- £ 28,024 1028 £34,814 Increase £ 6,790 Coming to the balance-sheet, this looks much- better than m 1927 — more buoyant and elastic. This is due principally to the fact 6 that during the

of additional working capital. The whole of this amount has been found by placing

year - unaer review the capital was increased from £ 150,-. 000 to £250,000. No portion of the

Additional Shares,

additional shares ———————— to that value during the last two years. In 1927, 20,848 shares were sold and m the year under review 24,911 were taken up. It is not at all clear from the accounts, however, whether the amount raised prior to April 30, 1927, was earmarked for the Takapuna ferry purchase or for the new vehicular ferry steamer, which, it was stated m the 1926 report, was to be built. Whatever was done m the matter, it is clear that shareholders have found an additional £45,759 of capital during the past two years. There is one point m connection with these new Issues of shares which "Fiat Lux" expected to see embodied m the accounts — and that is the amount of premium paid thereon by the purchasers. This • company's shares have for many years past been quoted at well above par value and a fair average price over a period of years would be about 24/- each. .. Consequently, it would be reasonable

: " £100,000 has yet been subscribed, but £24,911, required to complete the subscription of the original capital of £150,000, was taken up during the year and was paid up m full. With the increase m the undivided balance of the profit and loss account of £1092, the shareholders' funds increased on the year by £26,003, to £190,438, out of which, however,, has to , come the final dividend for the year, which will absorb £5625. Sundry creditors at £25,308 show a decrease of £1931. As the ordinary trade creditors last year amounted to only £7239 and an oustanding obligation to the Takapuna Perry Company came to £20.000, it seems highly probable that — although this year creditors are shown m one item at £25,308 — this includes the £20,000 to the Takapuna Ferries and £5308 of trade accounts. The provision for income-tax, curiously enough, remains at last year's figures— £22so. Now, the profits disclosed last year were £9288 and this

to expect that the new issues went to year the returns are £11,235, yet the the public at not less than average provision for income-tax remain's the market price. If this was done, what same. , . has become of the premium money", Perhaps it is not generally known which would amount to just a trifle that the rates of land tax and incomeunder £10,000? tax are fixed each year by Parliament, balance-sheet. Consequently, it would be reasonable Of course, it may be that for some to expect this company to make special reasons these shares were income-tax provision at the same' rate offered to existing shareholders at par as last year, but as it has not done so, m proportion to the shares then held, two very pertinent queries arise. as a reserve, either general or specific. 0 aye interesting specuThere are many explanations pos- lation afiyhow. sible, all of which emphasize the extra- ' ordinary ease with which the published A new item among this company's jippnimta nf hoth . liabilities is that of

large and small concerns may ,be manipulated — all quite within the law— but, neverthe-

Difficult Period

mortgages, which, however, at £3644, do not call for more than passing notice. Two items which

less, they can be ' (and often are) so manipulated to keep speculators out. Such moves are usually m the direction of consolidating and conserving the interests of the. genuine lnvestmem shareholder, and, accordingly, littltexception can be taken thereto, uriles^ some news of the "cold storage" process leaks out, when the sharks leap m where honest-torgoodness ;. investors fear to tread. . . . ' Although the directors of this concern must have had very strenuous tinies during the last three years m meeting and overcoming, the difficulties m connection with the Devonport-end shore transport, they have not neglected the earning side' of the business proper, as is shown by the annexed table, which sets out the company's disclosed net earnings and the disposition thereof for the past six years. It will be seen that the earnings for the period totalled £58,346, of which £51,555 was distributed by way of a, "iVz per cent, dividend annually; £6650 was. added to. reserves and the undivided balance of the profit and loss account increased by £140. In addition, it is stated that ample; depreciation has been written off annually. .- ■' Consequently, reserves, which, m 1922,- amounted to £28,024 (including £406 of undivided balance m the profit and loss account), m 1928 have risen to £34,814, including £546 m the profit and loss account. ' " It is. noticeable, however, from the analysis that reserves have not bjeen strengthened during the ■ past two years', as' the-. 7% per. cent, dividend called for practically the whole of the disclosed net profits. « . ••-. Undoubtedly, the company, has had a very difficult time during the period

have entirely disappeared from the liabilities are bank overdraft' £12,040)- and Unclaimed lividends. The former is now converted into a credit balance of £1689, but payment 'of the final dividend will, of course, set 'his back £5625. The principal assets, consisting- of steamers, plant, freehold property,' mortgages, etc., are still shown most objectionably m lone entry at £205,651, an increase for the year of £15,482. Why "fixed assets," such as plant, should be lumped with "floating- assets," such as mortgages, "Fiat Lux" does not know, but he could give many sound reasons against the practice. The, shares m this company ap- ■'■ peal to. "Fiat Liix" as being a sound investment for many years to come, although changes m local conditions, such as the building of the . proposed harbor bridge — if it ever ; eventuates— rwill affect the company's earning power. But present investors hardly need worry about changes of that nature. At ' the current market price of £1/4/9, these shares on a 7% per cent, dividend basis are returning over 6 per cent, per annum and the surplus of assets over liabilities stands at £1/5/4 per share.

DEVONPORT STEAM FERRY COMPANY, LIMITED. Condensed Balance-Sheet, April 30', 1928.. LIABILITIES. T ASSETS. Capital paid up ..... 150,000 *2_,911 Steamers, plant, freeReserve 15,867 — hold property, mortReserve steamer m- gages, etc. 205,651 *15,482 surance 12,400 — War bonds 6259 — Accident insur. fund 3000 — Stocks on hand ..... . 5520 ■ *2470. Boiier renewals ac. 3000 — Debtors . 2491 t3981 Profit and loss 6171 *1092 Cash m hand and -^-j- : bank 1689 *1689 Shareholders' fun d s 190,438 *26,003 Creditors 25,308 U931 income-tax 2250 — '-„.'". Mortgages 3644 *3644 Bank ...... j ....;.. . — f12,040 „ • Unclaimed dividends — tl6 £221,640*15,660 £221,640*15,660 Note: 1 * Indicates increase and t decrease compared with last year's figures.