COMPANY BALANCE SHEETS.

Otago Witness, Issue 3877, 3 July 1928, Page 7

COMPANY BALANCE SHEETS.

GOLDSBROUGH MORT & COMPANY, LIMITED.

* Subject, to a 10 per cent bonus to staff, t Including bonus. . . " . A fresh issue of capital amounting to £250,000 has been made during the past financial year, ranking for six months’ dividend and : a 5 per cent, bonus. (Consequently, a further £25,000 is required the profits to meet the usual 15 per cent, distribution. The gross profit on this occasion shows a surplus well ; n excess of that of 1926-27, but the excess is for the greater part pared down before the net profit of £331,466 is struck. With the extra demand made upon the net profit, by the portion paid to shareholders, the transfer to reserves is diminished from £50,000 to £12,500. The provident fund is again swelled by a contribution of £5OOO, leaving £26,466 to add to the floating balance. Although the annual contribution to reserve fund, is down, the issue of the new shares at a 75 per.cent, premium has increased the fund by £187,500. Its aggregate, if- the directors’ recommendation is confirmed at the forthcoming meeting, will be ’£1,500,000,. or equivalent to threefourths of ‘ the enhanced paid-up capital. Further reserve accounts are found in primary, secondarly, equalisation, and Brisbane premises reserves, providing an additional £245,000. The total of the visible reserves comes to £1,865,635, subject to a proposed reduction for a bonus to. staff, leaving the position relative to capital little altered since March, 1927. There are investments in gilt-edged securities to the exten*. of £100,121, but otherwise reserves are employed in the business. The company is partly* financed by debenture stock (£1,428,622) and deposits (£201,847). The former has altered little, but the deposits, which include interest accrued, are down by approximately £200.000 —the result,. it may be taken, of the latest issue of capital. The rate of interest incurred by deposits ’is not stated, but the cost of redemption in that .manner will involve an annual charge of 15 per cent. _ on the amount redeemed. As the capital* is now paid up to its* authorised amount, there is no expectation meanwhile of further aid from that'quarter 4 n reducing the deposits The important part played by debenture’stock is evident’ when roughly three-fifths of their total involves a 4 per cent, interest charge, and the balance 5 per cent. The ordinary liabilities are practically all summed’up under sundry creditors at £606,412. - • They are entered as. amounts owing on open accounts, and, as such,7 do not hecessarily represent- indebtedness. The provident fund, which during the.past four years, has received £20,000 -annual surpluses, is apparently one of. the group, anfi there may be others .of, i a similar nature. The fact that they'apb reduced from. 735.000 may, or may-.not, mean -a cprresponding reduction ip indebtedness’. •’ =' ’■ i : Advance,s have risen to £4,445 217.'. the smallest annual increase since 1922. Their relation to the total assets at. the last 11 balancing dates has been as follows, viz.:'

*' • Alter providing for bad and doubtful debts. By over’£Buo,ooo the advances exited capital, debenture stock, and deposits combined. It is thus seen how the reserves retained in the business are partly employed.’, The increased advances at this time are one evidence that the growth in borrowing is being curtailed as a result of the satisfactory wool season. With the additional money acquired by the business, there should have been sufficient to meet the-./extra. .demand without-realisa-tion of investments. /V - Apart from', those earmiirkedS-?for ; primar. i r£siivve, investments thtal: |9Q>725 in debentures, inscribed stock," and abates in other cpsqpanies. Deposits, .howler, consist of4^3,OOQr-^whether

otherwise is not stated—and they presumably form the chief reservoir from which to withdraw funds if required.' It may seem slightly incongruous to have assets in that form to such an extent when there is a liability of over £200,000 under the same heading. Apparently the margin of some £260,000 is not considered sufficient to work upon. The large figure of £302,121 represents cash with bank and in hand, and, in conjunction with merchandise valued at £37,923, brings the total liquid assets, excluding advances, to over £1.000,000. ■

Fixed assets, . after deducting £54,300 for mortgages, amount to £832,279, which, however, includes stock. Freehold and leasehold properties in the company’s hands come to £238,641 after the leasehold. has been subjected to its annual writing off. Business premises account for £553,075 after a depreciation allowance of £6790, which, on the face of it, looks small, but under the circumstances may le ample. As plant, machinery, furniture, etc., have been reduced to £41,163 by a (depreciation provision based on a valuation, it may be taken that the allowance, whicl works out at approximately 81 per cent., is not excessive. The current year will have the full benefit of the extra capital, and it will be interesting to see how far the payment of the 15 per cent; to shareholders can be maintained concurrently with the steady building up of reserves that has been a feature in the past.

BANK OF / NEW ZEALAND.

The drop that has occurred in the net profit from that of 1926-27 is practically negligible, when the magnitude of the figures is considered. Owing to the recent issue of long.term mortgage shares, there are more claims upon the surplus on this occasion, but it is quite sufficient to meet those extra demands, to maintain the returns, on the preference and ordinary shares at their former rates, and to provide a substantial sum to augment reserve fund. The proposed transfer of £124,175 to reserve includes a surplus of £73,511. from securities .realised, leaving the net' profit to supply £50,664. That sum being in excess of the balance available, the undivided profits brought forward are called’ upon for the deficiency of £2130. The total amount distributed in dividend during the year aggregates £793,344, or an average rate of nearly 13 per cent, on the’ capital employed. Holders of ordinary shares receive the same bonus addition of: 1 per cent, to their dividends-as last year, while the holders of the "B” preferenceshares in the shape of the New Zealand Government also receive a’ repetition of the bonus of 1926-27, viz., £18,750. The paid-up capital has undergone some alteration by the issue of the long-term mortgage shares. During the year, two further instalments have become due,.re-, suiting in an increase of £242,013 to the. capital. As the, final instalment is not payable until June 30, the full effect of the issue has not yet been felt. One-fourth is still due on the “C ” class, which is held by the Government, but a considerably smaller portion is outstanding on the D shares. These will have ranked fordividend to the extent of three-fourths of the issue, and for part time only. The various classes into which the capital is divided must render the book-keeping a complicated matter, as there are no fewer than six now implicated. .. The recent increase in capital has been accompanied by a proportional rise in general reserves.. The transfer of £124,175 to reserve fund-, -making, with the premium received on the odd “ D ” long-term mortgage shares, an increase of £125,000 for - the year, continues the descending scale of the allowance of late years. Deducting the surplus from securities realised, the contribution from the trading profit is £50,664, as against £56,580 12 months ago. The prior year it was £147,689, whereas at March, 1925, when there was no receipt from extraordinary sources, the allowance was £250,000. The

relation to the paid-up capital for the past 11 years has been as follows, viz.:—

When on the latest three closing dates, hidden reserves have been brought to light aggregating £316,931, a conjecture is raised regarding the proportion of reserves that appears in the printed statement. As the transfers of the amounts thus. disclosed have gone to swell the general reserve fund, and the net profit has been relieved in consequence of claims to that extent, shareholders may well be gratified. A further reserve of £426,000 is earmarked for taxes, and has remained intact for the last seven years. During that time the burden of taxation has been greatly lightened, but the prudence of retaining the reserve undiminished is obvious.. Notes in circulation stand at £3,797,080, and. although slightly up from March, 1927, are well below their figure of prior years. _ The large function performed by notes, is apparent when they occupy the position of third, or it may be second, largest liability. With their circulation restricted to only three times the value of gold held, and with their validity throughout the greater part of the sphere in which the bank operates, the assistance given by them must be considerable. Coin being included with cash balances and deposits. with bankers, a comparison of notes in circulation with gold held.is not possible. A comparison of them with the larger group gives the following relations, viz.:—

The coin group has practically retained its former amount, and, as the statutory protection in gold for the above notes is approximately one-sixth of the aggregate of the other, it may be assigned that the circulation is more than amply covered. It may be noted that in addition there is bullion to the value 0f’£5531.

The progress of the miscellaneous group among the liabilities is always interesting. At £3,954,878, it has slightly diminished. Bills payable, one of its constituent parts, is liable to fluctuation, and the decrease may be due to them rather than to any reduction in the provisions for continfencies that it In any case, the ull sum entered can scarcely be regarded as- an item of indebtedness, and its place among the liabilities may be lower than that of notes. The long term, mortgage department furnishes a further item of £296,448 oh this side, representing the balance of the capital raised for that purpose, but not yet issued in loans. Deposits have risen to £30,339,033, concurrently with a fall of approximately £ 1,000,000 in advances. Although the relative positions have not returned to those of two years ago, a welcome move has been made in that direction. Advances, after a steady rise since 1922, have been effectively checked, while deposits have added some £675,000. In recent years, the respective amounts have been as follows, viz.:;— A ,7

From the above columns, it would seem that, while the progress of advances may give a fairly reliable index of the course of a banking business, the same can scarcely be said of deposits. The latter are barely up to their figure of 10 years ago, when advances represented a sum’ little more than one-half o>f deposits. The paid-up-capital has trebled, in the interval,. and while advances have, with the exception of the abnormal'years" of 1 1920-21 and 1921-22, maintained Off thd whole"'a steady increase, deposits have remained- station-

ary, or, if anything, gone back. Are there greater inducements for the employment of the money in other forms, or is the community willing to work and live on a narrower margin? The extra money received as the result of the adjustment between deposits and advances has apparently chiefly found its way into the money invested at call group. That group also contains securities held in xiondon, but the assumption is that it is to the more readily realisable section that the group chiefly owes its rise of nearly £3,000,000 to £7,119,805. Bills receivable, by their reduction to £2,885,327, have also contributed. Among the more permanent investments. New Zealand Government securities at £3,644,300 are virtually as they were at March, 1927, while the same may be said of those with municipar and other local bodies at £979,586. Australian Government securities, by dropping nearly £60,000, are mainly responsible for the fall in the aggregate of the three from £6,734,658 to £6,692,272. The fact that these investments have been affected by the additional funds in hand suggests that the present position with regard to advances is expected to be only temporary. As the realisation of investnients provided a surplus of £73,511 during 1927-28, after a similar surplus, of £143,420 for 1926-27, the book value of the investments may be regarded as well below their market value.

The-rise of landed property, premises, etc., to £533,597, continues in a less degree the upward movement since March, 1922.- If provision for depreciation has been made, there is no mention of it in the . printed accounts, but capital expenditure of approximately £13,000 for one year seems small when the extent of the properties is considered. It is possible that the natural increment in that time may amount to considerably more than that sum. In any case, the reserve sunk in the fixed assets must add materially to other reserves, visible and invisible, by which the bank is supported, and which, by reason of their indefiniteness, possess a strong influence of their own. While the past year’s figures show nothing in the way of record results- there is an indication that steady progiess is being maintained. The share that the bank takes in the financing of the Dominion is an ever-increasing one, and, with the well-being of the two so closely connected, the prosperity of the bank must directly affect the. country as a whole. The largest shareholder is the people of New Zealand through the Government, the.dividend on whose holding for 1926-27 was in the vicinity of £230,000, and . for 1927-28 will be nearly £240,000.

Mar. Paid-up G ross Net fllivi31 Capital. Beeerves. Profit. Prolit. dead. £ £ £ £ p.u. 1918 702,737 700,630 366,644 184,933 15 1913 773,010 658,018 3<>9,318 160,545 15 1920 < 773.010 612,140 298,901 100,481 15 1991 916,843 617,426 256,789 61,410 : 15 1922 916.849 . 651,296 377,656 174,437 . J5 1923 966,849 ' 709,279 431,112 170,425 15 . 1924 966,849 783,703 498,039 231,130 15 ; 1925 i-sbo.ooo-1,342,143 806,413 320,207 15 192S 1,750,000;. 1,597,213 846,050 331,326 : 15 1937 1,750,000 1,639,169 855,272 15 1923 2,000,000 . *1,865,635 888,060 331,466 15

•Advances. ' £ Total Assets. £ . > Ratio. P.O. . 1917-18 - ; 1,824.770 3,171,213 57.54 . 1918-19 ... • 1,720,044 3,199,848 : .■ 53.75 1919-20 ■..'.’ 1,967,430 3,112,516 > 65.21 1920-21 2.284,606 " 3.208,803 •• 71,20 1921-22 .— .2,120.126 3,287,799 ' 64.48 1922-23 ' J.? <2.018,607. 3,447,816 58-55 1923-24 3,575.757 58:69 1924-25 .’S’* 1,631,158 5,258,799 - 63.05 1925-26 ... 3.687,113- . 5,744,338 ; -T' . ‘64.19 1926-27-<<397,223 6,073,267 72.40 •k1927-28 *'t.£.-«4;445,217 6,327,200 ■ x70.26

Dividend. March 31 Gross Profit. £ •Net Profit. £ Pref. A B P.c. p.c. Ord. p.c. 1918 1,106,441 336,606 10 15 15 1919 1,217,153 388,021 10 15 15 1920 1,376,838 419,045 10 15 15 1921 1,644,017 777,255 10 10 13J 1922 1,809,255632,042 10 10 131 1923 1.546,041, 553,638 . 10 10 13J 1924 1,709,288 735,831 10 10 13* 1935 - 819,285 10 HJ 13* 1926 1,888,309 912,160 10 11.8 13* ’.927 1,83O,8«l 847,670 10 13.2 14* 1928 1,816,869 841,878 10 13.2 14* • After deducting interest on 4 per cent, each year guaranteed stock

General Paid-up Reserves. Capital. Ratio £ £ p.o. 1917-18 ... 2,345,702 2,279,988 102.88 1918-19 ... 2,496,224 2,279,988 109.48 1919-20 ... 2,646,520 2,627,441 100.72 1920-21 ... 1,886,275 3,904,988 48.30 1921-22 ... 2,105.818 , 3,904,988 53.92 1922-23 ... 2.246,957 3,904.988 57.54 1923-24 ... 2,831,514 5,029,988 56.29 1924-25 ... 3.088,299 5,029,988 61.40 1925-26 ... 3,390.378 6,154,988 55.08 1926-27 ... 3,609,656 6.529,186 55.28 1927-28 ... 3,732,525 6,771,198 55.12

• Notes; ' Coin, Cash Balances, etc. Batio. pc. 1917-18 ... 3,312,995 . 5,500,385 . 60.23 1918-19 ... 3,728,429 5,918,455 62.99 1919-20 ... 5.765,337 8.371,535 68.87 1920-21 ... 4,741,492 5,925,791 80.01 1921-22 ... 4,294,230 7,427,410 57.82 1922-23 ... 4,564,695 7,974,011 57.24 1923-24 ... 4,079,101 7,196,347 56.59 1924-25 ... 4,168,844 7,056,319 '59.08 1925-26 ... 4,444,392 7,291.795 60.95 1926-27 ... 3,765.593 7,532,199 49.99 1927-23 ... 3,797,080 7,527,426 50.44

•Advances, etc. Deposits. Ratio. p.c. £ £ ■'1917-18 .v. 16,468,493 30,437,936 54.10. 191849 ... 17,389,787 . . 31,716,353 54,83 •: 1919-20 ... 17,929.615 37.661.610 . 47.61 1920-21 ... 27,725,874' : 34,475,655 80.42 ’ 1921-22 ... 23,312,130 ■28,676.603- - 81.29 ■ 1922-23, ... 17,746,718 .30,003,926 . 59.14 ■ 1923-24 .... 18,787,101 30,501,719 .61.59 ; 1924-25 ... 19,329,186 30,079,282 64.26 ’ ■' '1925-28 20,994,611 : 31. ; 121 288 ' ■ 67.46 ; 1926-27 ... 22,462.952 29,664,024 -73.73, 1927-28 ... 21,453,565 30.339,033 70.71 • After ful debts. deducting provision for bad and doubt-