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Otago Daily Times, Issue 19904, 25 September 1926, Page 15

COMPANY BALANCE SHEETS THE NEW ZEALAND FARMERS’ COOPERATIVE ASSOCIATION OF CANTERBURY (LTD.). Fixed Deposit Carry Paid-np and Eeservo Dividend ForCapital. Bond Issue. Fund. Pref. Ord. ward July 31 £ A £ P*°* 4 1919 635,867 653,913 170,000 68* ’8,610 1920 772,639 605,071 178,081 68J 12,061 1921 883,821 1,218,065 190,000 6 7 2,267 1922 883,974 1,169,790 131,134 6 1923 879,924 1,060,184 8,907 1924 879,924 1,037,493 1925 972,341 1,027,082 1926 887,335 1,000,258 • Debit balance. The gross profit for year ended July 31 last works out at £223,244, as against £224,532 for its predecessor. The fall that has occurred under the headings of commission and interest is largely made up by the greater earnings from merchandise and gram. Charges have risen nearly £20,000, mainly through an increased wage bill, but the other items, which are fully detailed, show little difference. Among the special provisions, depreciation on plant is l-3fis by some £SOO, and- the allowance for bad debts and reserve for doubtful accounts is reduced from £35,947 to £7930. For reasons that appear elsewhere, special attention has ’Deen given to this matter, and the smaller figure may bo due to the fact that only the past season’s transactions are being considered here. Some regrouping has taken place among the fixed assets, and warehouse fixtures are now separated from freehold and leasehold property. This alteration in itself can hardly be responsible for the drop of the latter by soma £46,000 to £425,879, and possibly there has bo?n some during the period. A more than compensating fall has taken place in the total on mortgage, which is ieduced by approximately twothirds. How the net amount of £417,479 may compare with the present-day value of the land and buildings is, of course, not asccrlainabh;, but it is a matter that requires some careful attention, as these properties have not been subjected to a depreciation allowance for some years. Doubtless a keen scrutiny was directed on this point during the recent investigation. The other group of fixed assets, embracing warehouse fixtures, furniture, machinery, and plant, shows a net figure of £60,000. With the addition of warehouse fixtures the group is less by some £3OOO, a result that may be traced to the special provision for reduction of values that was initiated during the year. The depreciation allowance in consequence bears a somewhat high proportion to the total figure. Stocks continue to mount and have reached £441,569. The effect of having so large an amount lying in stock must be severely felt. This asset has also participated in the proposed writing down, although apparently not to any great extent. The action of depreciation on stock of this value will be considerable, and will be apt to increase in momentum as time moves on. If the figure represents a fair average throughout the year, it is scarcely to bo wondered that the bank overdraft is at its present height. Advances on security have risen to £1,295,320, but sundry debtors have fallen to £275,427. With them are included farm properties in course of realisation making an aggregate of practically £1,600,000 from which reserves of £348,479 are deducted. It is to these accounts that the reserves, instituted after the recend examination, are being mainly applied, and the sum of £348,479 is being directed for that purpose. As it amounts to about 22 per cent, of tbs whole, it is to be hoped that all uncertain accounts are now covered. Bills receivable at £21,258 seem somewhat larger than usual, and cost of bond issue is an asset that no longer appears on the balance sheet. The indebtedness which was reduced at July, 1925, has risen some £20,000. Below are’ the details lor the past three seasons—viz.:— 1923-4. 1924-5. 1925-6. Bonds £630,000 £530,000 £530,000 Deposits 600,875 488,368 466,395 Fixed deposits ... 6,618 8,714 4,863 Shareholders’ current accounts 300,857 321,026 344,824 Sundry creditors 92,969 108,881 54,483 Bank 348,932 129,100 308,818 £1,678,251 £1,686,089 £1,608,381 A substantial reduction has been effected in shareholders’ current accounts and in sundry creditors. Deposits are also less, and in two years have fallen £35,000. The longest period any now have to reach maturity is eight years, and the demands for repayment are likely to come in faster during the time that is still to run. Bonds of £357,000 mature during 1930, and the balance five years later. If some extension of the date of repayment could 03 managed, it would be advantageous. The substantial rise in the bank overdraft to £306,816 Is one result of the reduction of other liabilities, and. until some inroad is fiiade upon the stock, it is difficult to see how this indebtedness can bo brought down. In view of the large bill for interest that will fall to be met annually, it is somewhat surprising to find that interest account show's a credit balance of £4548, as it may bo assumed that the treatment now being accorded to bad and doubtful advance accounts may mean that interest accrued has to bo written off in several cases. The accounts Issued 12 months ago recommended that certain measures be taken to deal with the debit balance brought out at that time, and the ordinary shares, by being written down 15s per share, and the preference shareholders, by forfeiting their cumulative rights to dividend as from July 31. 1922, were to bear the sacrifice. Apparently these measures were insufficient to cope with the situation, as the directors now place before the shareholders a further loss that has to be faced through provision having to bo made for a sum of £420,855. Shareholders, who have submitted to the previous writing down of 15s per share, will naturally feel aggrieved at learning that a further reduction of 35s per share is now recommended, and they will inquire it this drastic step is likely to see the end of their troubles. Holders of “A” and “B" preference shares are also being called upon to contribute this time by yielding up £1 per share on their holdings, and, as a necessary corollary, they will he asked to torgeo their dividend for the past year. The rest of the deficiency is to be met by a transfer of £45,000 from doubtful accounts reserve, and an appropriation from the past year's profits of £25,780. It Is staled that the above measures will place the association’s balance sheet on a solid foundation. If they have placed the business on a solid foundation the balance sheet will, as a matter of course, be similarly situated.

The causes of the large deficiency are given as (1) advances beyond the value of securities held or ability of borrowers to pay, and (2) inflation of stock values. Evidently they are not of new growth, and are legacies from past years. The management realises that the sooner the position Is faced the better for ail concerned, although there must be misgivings in certain quarters as to whether all the “dead wood” has been lopped oft. It la a necessary move to make, and it is to be hoped It will meet with success.