COMPANY BALANCE SHEETS.

Otago Witness, Issue 3806, 22 February 1927, Page 14

COMPANY BALANCE SHEETS.

THE AUCKLAND GAS COMPANY (LIMITED). Vaid-up Debunv- Net Pw '* Capita) tjres. Deserves. Profit. Divid

The paid-up capita) of this company has taken a further pronounced stride during the past year, and, the net profit having kept step with it in a corresponding proportion, the 8 per cent, distribution to shaicholders is maintained. A certain number of nsw shares was issued in 1926, but the increase chiefly comes from 5s having been called up on each part-paid share during the period. After the dividing is met, there is a sum of £837 to add to the undivided surplus, or approximately .03 per cent, on the paid-up capita) as it stood at the close of the financial year. It cannot be 'aid that the interests of the present proprietors are being sacrificed for those of - the ■future,' as the policy of the management appears to be to pay away all surpluses as soon as they are earned. Looking to the fact that there is an indebtedness of something like £385.000 in debentures and temporary loans —an indebtedness which shows a tendency to increase rather than otherwise —it mi<rht have been expected that more attention would be paid fp the strengthening of reserves, even

although this meant some drop in the rate of dividend. As no mention is made in the directors’ report of an alteration in the price of the gas since the last annual accounts were issued, it may be assumed that the fall of nearly £5OOO in the sales has been brought about by the smaller quantity consumed on a ’basis similar to that of 1925. Residuals, fittings, etc., contribute virtually one-sixth of the revenue, and, in their smaller sphere, are moving upward satisfactorily. Considerable economy had been effected in the disbursements, mainly under the heading of coals, and rates and taxes —a saving ■which the enhanced expenditure for repairs and maintenance of work is not able to outwefght. The respective totals on each side of the working account since 1919 are as follows:—

The manner in which the ratio has been reduced each year speaks well for the' supervision exercised. It must, however, be a matter for concern to see the retrogression of the sales in view of the larger capita) expenditure. The total capital expenditure amounted to £1,321,781, as against £1,274,364 twelve months previously. It is almost balanced by. the aggregate of capital and money borrowed on debenture as shown on . the other side. It is not clear in what direction the depreciation allowance of £24,290 has been Applied—a smaller allowance than that of 1925, in spite of the larger value to be covered —but it may be

assumed that, like the expenditure, it chiefly affects meters, mains, and services. Land at its former figure occupies less than one-twentieth of the whole, and the probability is that it is steadily appreciating. Buildings and machinery at £572,323 are practically unaltered, and meters at £146,287 are barely £4OOO up. Possibly the greater part of the extension of the mains and services did not take place until the latter period of the year, in which case there will scarcely have been time to receive the full benefit from them in the latest accounts, or they may have been laid in districts which are not yet fully developed, so that time will be required before they can bring in a commensurate return. The relation of the fixed assets to the total is as under: —

With the exception of 1921, the proportion for last year is the lowest for the past seven years. Stock continues to rise, and has reached £129,302. Practically all the sections have increased, gas fittings showing the greatest difference. - The result of :he larger amount locked up in stock is .-e--flected in the larger temporary loans. There is left a sum of about £109,000 to provide the working capital, out of which £68,803 represents accounts due to the company, and may be looked upon as more or less of a permanent outstan-.1-iug* iug* A further sum of £38,700 is employed in the form of investments bring-

ing in an annual revenue of £1717, and may be regarded as the equivalent of tne accumulation of undivided profits. Cash at bankers (£1127) has changed sides since December, 1925, when it showed an overdraft of a slightly larger figtire. Sundry liabilities have risen to £25,566. This may be the natural outcome of trading on a larger scale, and, in. its relation to the accounts due on the other side, this item is merely maintaining its position. The temporary loans an deposit have reached £125,971, and add considerably to the amount of money borrowed. With the two classes of debentures, the aggregate comes to £385,021, or some £25,000 in excess of the total amount authorised to be borrowed on debenture. It looks as'if the temporary loans are resolving themselves into a permanency, and if the lenders are chiefly if not entirely to be found among the shareholders, they may be beneficial for the time being, but when they are found to be increasing as the amount of capital issued becomes larger, they appear merely a temporary expedient, which sooner er later must be liquidated.

THE WELLINGTON GAS COMPANY, LIMITED. Paid-up capital: 1917, £310.537; 1918, £310,340; 1919-21, £320,340; 1922-26, £363,370. Dividend

The net revenue for the past year shows a further shrinkage on that of 1925, but the company continues its conservative policy regarding the disposal. The roturn is equivalent to 16.74 per cent, on tlie paid-up capital, which is divided between . ordinary and preference shares in tho proportion roughly of three to one. : As the preference shares are entitled to 5 per cent., and it is proposed to pay the customary dividend of 8 per cent, on the ordinary, the portion of tho surplus retained in the business is larger than the portion distributed. The management apparently does not regard that allowance ag sufficient, and has withdrawn an additional amount of £3009 to place to depreciation. The floating balance is reduced accordingly. Sales are well maintained, and are £2592 higher than for the previous 12 months. The increase is more than counteracted by the heavier expenditure, which aided by three rises in the price of coal shows an advance of nearly £7OOO in the manufacturing and distributing group alone. The rise that has taken place in tho general charges is cancelled by the reduced rates and taxes, but a deficiency of about £4OO remains in the balance carried to profit and loss account. The expenses and sales for the past 10 years stand to each other in the following proportion, viz.— Orilinnry

Although the relation for 1926 has risen 2 per cent., it is still well below the annual average since 1916. An appreciable reduction has been made in the mortgage debent-ue stork. The holders were given tho option of continuing at 64 per eent. or repayment, and the double purpose has been achieved of a lower rate of interest and of a reduction of tho amount borrowed by £16.000. The rest of the liabilities total something less than £12,006, inclusive of the superannuation fund of £2OOO.

The company is well supplied in the matter of reserves. There is no general reserve account, each division being earmarked for a special, object. The largest is depreciation reserve, which, standing at £45,400, has been materially increased during tho past 12 months. The allowance of £16,000 from the surplus has not meant an increase to that extent, as application has been made upon it for £4OOO, but if a transfer of £16,000 is made annually for a few years, the account will quickly swell. Taxation reserve at £32.328 would seem to give ample provision for its purpose and leave something over. The total of tho group comes to £111,752, or equal to 30.75 per cent, of the paid-up capital. The cash assets have been considerably encroached upon. The investments are tho chief sufferer, the amount in the New Zealand Government War Loan having fallen over £50,000. Further decreases aro • shown by shares and debentures held in other companies a>»d amount on deposit, bringing the aggregaie down altogether by some £6O-000. Judged by- the revenue received from these sources, the realisation seems to have taken place towards the close of the financial year. Stocks on hand (£15.233) and amounts due to the company (£22,638) are both slightly itp, but neither item looks large, and in the ease of stock appears surprisingly small. What the liquid assets have lost in funds, the fixed have gained. Expenditure of a capital nature has amounted to over £70,006. No distinction is drawn in the printed accounts between the different properties, but it is gathered from the directors’ report that 'he expenditure is fairly evenly, distributed. With the exception of land, all appear to have received attention. The alterations and additions to the buildings will bring in a larger rental, direct and indirect, and the nine miles of new mains, together with the special main in process of construction, should also assist the revenue, although tho effect may, perhaps, not yet be fully apparent, The current season also will be the first to receive the full benefit of the new plant. The sum of £21,314 that- has been written off is increased by the allowance of £16,000 for depreciation reserve, and, together they make a liberal allowance. 3he relation of fixed property to the assets works out as under, viz. : — •

Tho property account now stands at its highest figure, and occupies a larger share of the total than it has done since 1918. From the above columns it would seem that capital expenditure is not incurred evenly, but a year or two of extensions is followed by a lull. Whether that course will be pursued in this instance remains to be seen, but the property must he kept up to date, and unless the present policy of writing down., rigidly each year is- maintained there is a danger of the fixed assets absorbing the whole. CHRISTCHURCH GAS, COAL, AND COKE CO (LTD.). Paid-up capital, 1918, £217,460; 1919-25, £231,635; 1926, £289,330. DiriDebcnturcs. Deserves. Net Profit, (lend.

' The outstanding features of the past year in this company’s history are the capitalising of a certain portion of the reserves and their consequent distribution of them to shareholders, and a redaction of 4d per

10C0 cubic feet in the price of gas after the first cjuarter was completed. As the larger capital ranked for dividend from the beof the year, a return of 8 per cent, for 1926 is practically equivalent to one of 10 per cent, for 1925. With a reduced price or gas for three-fourths of the period, the means of producing the surplus correspondingly curtailed, but the result vindicates the policy pursued, and a net profit of £24,137 is brought out. It is equivalent to a return of 8.34 per cent, on the paid-up capital, and provides an addition of £990 to the undivided profits after a distribution of £23,147 to the shareholders. . . The quantity of gas sold is said to have been the highest recorded in the company’s career. Along with the other sales, it realised a total of £181,662_ and in doing so struck approximatly the average of the previous two years. In fact, the similarity of the figures for the annual sales since 1922 are remarkable, and it must not bo forgotten that a reduction of Is 4d per 1000 feet of gas has been effected during that time. The relative expenditure has shown some more variation, although not to any great extent, as the undernoted columns show—viz. :—

The commencement of a progressive policy in connection with main extensions has begun. In itself this is a matter of capital expenditure, but in the pursuit of it during the past year and the succeeding few years, the general expenses are liable to feel its effect, and the rise of some £5OOO that has occurred in 1926 is not likely to be lowered before the compi?tion of the work.

No further- accession has been made to the money on debenture during the past three years. At £lOO,OOO this item constitutes about three-fourths of the ia bilities, and at 54 per cent, interest, intails an annual payment of £5500. As a set off there are investments held of the book value of £12,290. representing a portion of reserves, the income of which will reduce the interest bill. Borrowing a sum on debenture equivalent to about onethird of the paid-up capital must suit <he company and the lenders equally well. It remains to be seen whether the projected capital expenditure can be accomplished ■without adding to the money on loan. The other liability is sundry creditors which item, at £31.088, is practically unaltered in amount as the result of the 12 months trading. _A reduction in reserves has taken place in consequence of the recent capitalisation. The premium on capital issued has disappeared, and an -encroachment of some £28,000 has been made on the general body. The surplus at this time after ineeting the dividend, has not been sufficient to permit of any transfer, and the only increase to their strength is the £990 added to the floating balance. They are well spread over, and comprise war loan and taxation adjustment. In rhe case of the .war loan there seems in ample allowance in the sum of £3028 V-hen it is considered that investments’ ail told, amount to £12.290.

As might be expected, the fixed ..ssets have, risen, and now stand at £493,039 Treehold property, at £19.775, is slightly reduced, and the increase of some £12,000 is entirely among the buildings, working plant, mams, and meters. A deprccia*tion allowance of £12.992 has been provided out of revenue for that group fWooo f Ca J? ital ex P e » di ture of about £-a,OOO tor the year. In a comparison ?0 1 o he , 1 f,xei \. asse | s "" ith the total since 1918, the ration has varied as follows—

Tniti! tne pa-t year the fixed assets have varied httle in value since 1922. Under the present policy, they are likely to continue increasing for the next few years and tne correspondingly larger depreciation to meet out of revenue should be more than made good from the larger sales. , ° , occupy the largest place anion" the liquid assets. Coal has now been ousted from the premier position, which is occupied by “mains, meters, cookers, etc.” It is worth noticing that, while the total, at £04,521, remains at about an average figure, coal on hand continues to decrease in value. Cookers on hire-purchase make an item that has greatly increased. Among the cash assets, the chief difference is found among investments which have dropped £lO,OOO accompanied by a fall in the bank balance. The money thus released has been absorbed by the fixtures. It will be interesting to see now the further capita] expenditure in contemplation is to be met, as, on the face of it, cash does not appear able to spare much more to capital in the meantime.

SOUTHLAND FROZEN MEAT AND SSITEDi. EXPORT COMp AkY

~ ~ Dividend, laiil-up General Net Cam. Dec. 31. Capital. Reserves. Expenses. Profit. Benns.

* Exclusive of special bonus dividend. The strong position that this company occupies in its cash reserves renders it less dependent upon the fluctuations of the frozen meat industry, and in its figures there is little evidence of the effect of the prevailing depression. Although the invested funds must yield a considerable revenue the buying and selling must still bring in an equal, if not greater, share of the net profit, and the regularity of the payinnt of a 10 per cent, annual dividend could not be maintained unless the trading account balance was well on th o right side. The net surplus of £13,769 is practically

the same as that of 1925, and is equivalent to a return of 12.13 per cent. There • 43 thus a balance of £2423 to add to the undivided profits carried forward after the dividend distribution is made. The item of £21,453 entered as profits in the. profit and loss account is a balance arrived at after certain provisions have been made.. The nature of some of the provisions is indicated without reference to their respective amounts, and the inclusion of sundry contingencies renders the figure useless for the purposes of comparison. On the other side, the general expenses aro grouped, making a total of £7685. There has been a slight rise here of some £3OO, but the way in which they have been maintained at an even amount for the past five years speaks well for the careful management. The uncertain quantity in the balance sheet is the heading of “sundry creditors and contingent liabilities” covering £50,200. It is virtually the same amount as that of 12 months previously, but from the vagueness of its designation it does not convey much information. The usual practice is to enter a contingent liability— as one that may or may not eventuate —apart from the ordinary liabilities, at the foot of a balance sheet, and it would be interesting to know why this method has been departed from. It be assumed that the contingent liabilities in this case are cniefly of the nature of reserves, but as-they are not separated from the debts due by the company, the indebtedness itself cannot be arrived at. No distinction is macle among the fixed assets, which aggregate £120,603. This is a lower value than they have shown for several years. Depreciation has been provided, the amount, of which’ is not stated, and it is assumed that the reduction is cluo to writing down, without capital expenditure to correspond, rather than to realisation of a. part. In the relation to the total assets, the fixed are further reduced as will he seen below—viz. :

Against the poition of the aggregate of £120,603 may be set. the reserve for building of £25,090. The assumption is that builcnngs occupy the largest place among fixed assets when a reserve fund is formed for that purpose. Whether they may be so or not, the proportions of 60 per cent, liquid and 40 per cent, fixed are exceptionally favourable for a concern of this nature. Nothing is said regarding the employment of investments or the method of their valuation. ]f they are entered on a conservative basis, they will contain a secret reserve especially if Government securities are held with a gradually appreciating value towards the date of maturity Theis £98,111 shows an advance of some £2600 during the year. The revenue from interest will lie swelled from the cash on deposit, the amount of which is not stated but which presumably forms the greater part of the £42,790 entered as cash in bank and on deposit. Sundry debtors and mortgages total £10,380. and a further source of revenue may be found here, although it is a little difficult to see why the mortgages are not included with the St ° c ! <s antl store s hi works at -A9.487 are sligntlv up. If is noticeable that the auditor in his report makes no direct reference to the stocks. rwww scanl ample reserves in the sum of allocated for general, lire insurance, and building purposes. definite transfer out of profits has been maife on this occasion, although funds were available, and the floating balance which was raised to £28,819 in consequence, brings the total visible reserves to £128,819 or 113.45 per cent, of the paid-up capital. On tne other side, investments anti cash in bank, a portion of wlvch consists of money on deposit, considerably exceed that sum. Furnished with reserves of such strength, the company is able to regard the future with comparative equanimity, and is able to proceed on its way, in an adverse time bke the present, paving its shareholders 10 per cent, and adding to its reserves.

£ £ £ £ p.c. :-au _ 557,817 109,050 143,336 54,395 9 1-6 1919 _ 459,226 105,050 113,621 55,484 9 1-6 1920 ... 560,841 109.050 135,830 47,523 9 1-6 1311 ... 830,858 258,550 31,241 61,695 -8 I9S» _ 833,9’6 259,050 32,854 68,202 8 1923 .. 938,001 259,050 34,468 73,161 8 1934 _ 965,571 2*59,050 37,458 79,037 ' 8 1934 ... 593,232 259,050 38,474 79,305 8 192ft _ i 13 259,050 39,311 83,393 8

Expenses. Sales. Ratio. £ £ p.c. 1920 .. 321 223 367,082 87.51 1921 .. ™ 381J7O . 441,124 86.41 1922 . . ... 394,253 460,736 85.57 1923 .. . ... 406,855 478,302 85.06 1924 .. ... 410,574 487,894 84.15 1923 .. . ... 411,592 489,180 84.14 1926 . . ... 404,806 486,483 83.21

Fixed Assets. Total Assets. Batio. £ £ p.c. 1920 953,868 1,097,291 86.93 1921 1,010.224 1,232,036 82.00 1922 1.046,909 1,206,845 86,75 1923 1,116,037 1,303,947 85.58 1924 1,209,030 1,403,753 86.13 1925 1,274,364 1.478.648 86.18 1926 1,321,781 1,560,094 84.73

Deserves. Revenue. pref. ord. Dec. 31. £ £ p.c. P.O. 1917 79,382 23,039 6 5 1918 94,269 38,404 5 5 1919 114,789 43,767 5 5 1920 121,552 34,354 6 8 1921 124.617 28,447 5 8 1922 68,212 38,445 1 «

1923 ... ... S3,962 54,622 5 8 1924 ... ... 74,899 69,409 5 8 1925 ... ... 96,542 64,895 5 8 1926 ... ... 111,752 60,838 5 8

expenses. Sales. Ratio. 1917 £ 9'1.380 £ 122.418 p.c. 81.18 1918 130.9(12 1G1.3G6 81.15 uno 149.127 188,894 78.95 1920 191.245 219.599 87.09 ! 1921 220.203 235.20G 93.62 1922 19G.543 218,027 90.15 l.V’3 170,449 20C.780 82.43 1921 157.499 211,727 74.39 1025 1G2.G79 221 556 73.43 1926 lC9,2fil 224 J48 75.51

Prop<rtv accounts. .Total assets. Ratio. £ £ p.c. 1917 419,742 466,004 89.94 1918 415,007 471,236 88.07 1919 410.3HO ’ 52.5,653 78.06 1920 ... ... 407,227 555,746 73 c 7 1921 460.022 683.228 67.33 1922 516,851 658,273 78.51 1923 523,997 674,176 77 70 1924 481,232 661,644 72.73 1925 520,995 689,980 75.51 1926 572,483 684,220 83.67

Dec. 31. £ £ £ p.o. 1918 25,000 116,706 24,109 8 1919 76,000 125,430 27,280 8 1920 76,000 133,793 27,845 8 1921 76,000 133,462 23,200 8 1922 76,000 133,512 23,213 10 1923 100,000 137,435 27,087 10 1924 100,000 142,739 148,394 28.458 10 1925 100,000 28,819 10 1926 100,000 91,299 24,137 8

Expenses. Sales. Batio £ £ p.c. 1918 ... ... 103,997 128,106 81.18 1019 ... ... 125,697 152,977 82.16 1920 ... ... 169.908 197,753 85.92 1921 ... ... 181,625 207.825 88.84 1922 ... ... 166,887 190.100 87.79 ... 155,243 182.329 85,14 1924 ... 153,518 181.986 84.31 1925 ... ... 152,209 181,028 84 08 1926 ... ... 157,526 181,562 86.71

Fixed Assets. Total Assets. Batio £ £ p.o. 405, !»:r> 528,648 76.80 1929 414,185 5:i;i.i;oo 77.62 1921 415.150 542,!>01t 81.99 1922 ... 481,i::o 545 9 n ° 8S.12 1923 480,692 565,052 85.07 1921 479,107 585,625 84.75 1925 1926 481,932 493,6.;!) 570,650 571.128 84.45 86.43

£ £ £ £ p.0. ’'MS RS,233 104,900 7,109 17,077 10 1919 ... 111,076 110,202 *6,318 76,140* 8 1920 ... 113,539 116,282 7,970 17,824 8 1921 ... 113,539 112,251 6,598 5,052 8 1922 ... 113,539 117,803 7,144 14,635 8 1923 ... 113,539 126,145 7,136 19,696 10 1924 ... 113,539 121,040 7,348 9,249 10 1925 ... 113,547 126,395 7,351 13,709 10 1926 ... 113,547 128,819 7,685 13,769 10

Fixed Assets. Total .1 sects. Ratio. £ £ p.c. inis i.iG.sci 251,745 51.36 min 137,624 322,5.30 42.67 1020 153.015 336,539 45.73 1021 168.555 200,682 56.05 1023 170,00:1 315,628 53.88 1023 ... ... 128.0.05 287,828 44.50 1024 121.016 283,844 42.06 1025 124,740 295.662 42.10 1026 120,60.1 298,243 40.41