COMPANY PROGRESS.

Otago Witness, Issue 3886, 4 September 1928, Page 9

COMPANY PROGRESS.

THE WELLINGTON WOOLLEN MANU FACTURING COMPANY, LTD.

I lie dividend of 10 per cent, has been maintained at this time, while £2OOO has been placed, to reserve fund. As the gross profit continues on a descending scale, the surplus necessary to provide the distribution and augment reserve has been made possible by reduced expenditure, lhe raising of the paid-up capital to £300,000 during the past year involved the need for providing a sum of practically £30,000 to meet the dividend. In the previous nine years the net profit has exceeded , that amount on three occasions only, and, except in 1919-20. when results were abnormal, left a small margin only to increase reserves. As, however, the capital during the same period has increased more than two times and a-half, the directors may be sanguine about the results for the future. The result for the past year, showing a rise of nearly £4OOO, may justify any optimism. The recent seasons have not been favourable for the woollen manufacturing trade as a whole in this Dominion, and the pendulum may be beginning to swing in the opposite direction. A' comparison of the net profit with > the paid-up capital since 1918 gives the -s4 under-noted returns, the fall that occurred a year ago having, it will be noted, been more than regained:—

Fixed assets show little alteration, the depreciation allowance of £5OOO counterbalancing the greater part of the year’s additions. Buildings, plant, and fittings being grouped, there is nothing to indicate how the provision is apportioned between buildings and plant, which presumably represent the bulk of the £227,312. It is stated that these assets have been well maintained out of revenue, but, as it is essential for both, the plant especially, to be kept up to date, it may be that the allowance, which represents barely 2f per cent, on the whole, is not over-calculated. Land remains at its old figure of £11,433, bringing the aggregate to £233,745, or 46.2 of the total assets. Stock at its various stages between the raw material and the finished article has risen to £216,154. However the respective parts may compare with each other, it may be assumed that raw material, with the higher prices ruling for wool, is mainly responsible for the rise, which is nevertheless scarcely up to its value of June, 1926. Sundry debtors, after including bills receivable and allowing for bad debts and discount, come to £55,294. There is thus a sum of £271,448 tied up - in stock and sundry debtors, or approximately 90 per cent, of the paid-up capital, which is more or less permanent. The addition of the fixed assets makes an aggregate of approximately £500,000. Under these circumstances, a bank overdraft is to be expected. At £56,700 it is not far short of half the total liability to outsiders, but in the latest twq years its proportions have been considerably reduced. . Sundry creditors account for £63,737, the reduction in the item being about equivalent to the amount of fresh money received for share capital since June, 1926. In total, the liabilities have risen to £123,570. Reserve fund, by its latest addition, has reached £54,000. It is all retained in the business, and is useful in its effect upon the bank overdraft. Fire insurance is responsible for a further reserve of £lO,OOO, also retained in the business, bringing the aggregate, after including the undivided profits, to £67,375. Since reserves were depleted some four years ago they ' have grown steadily. Concurrently _j the paid-up capital has also grown, with Vthe'’result that in their relative position there has been slight variation. General reserves now stand in the proportion of 22.46 per cent. . The paid-up capital has attained its full nominal figure of £300,000, divided between ordinary and preference shares in the relation of 2 to 1. As the holders of the latter class rank equally in dividend after the ordinary pay 6 per cent., they are exceptionally favoured. The matter of prpyiding working capital still remains all-important, and must exercise the minds of the controlling officials. THE KAIAPOI WOOLLEN MANUFACTURING COMPANY, LTD.

* Fifty-five weeks’ period. t Loss. The decided improvement shown by the latest period’s trading has been brought about in spite of higher wool prices, severe competition, and the dislocation of business- caused by fire at the mill, the gross return of £96,586 is the largest recorded for seven years, and is a welcome indication of the direction towards Which things are shaping. Approximately £20,000 higher than that of 192627; which, however, covered a period shorter by three weeks, the depreciation allowance has_ been increased, while a liberal provision has been made for income, tax and bad debts. After the'preference share dividend has been met, a dividend of 3 per cent, on the ordinary

shares is recommended —the first since 1921-22. In that manner almost ;tll the' net surplus of £11,692 is disposed of and a balance of £1262 remains to be carried forward.

Further realisation of fixed property having taken place during 1927-28, more secret reserves have been brought to light. The sale of part of the Dunedin property having brought in £6478 overthe book value, and that surplus, together with surpluses created from previous sales in other centres, has formed a general reserve account of £14,234. What the book value of the property most recently realised may have been is not stated, but, judged by the surplus obtained, it would be sufficient to cause a considerable reduction in. the book value of the property. As the fixed assets have risen some £5OOO since June, 1927, there have., apparently been additions on a fairly generous scale to counteract realisation elsewhere. A sum of £5OOO is recommended, and entered, for depreciation on plant, or £l5OO more than that of 192627. As a portion of the group of £176,538 is represented by land and buildings, it would seem that the wastage on plant is well provided for. The position of stocks in their different aspects is all-important. In the valuation of them at £285,638 they are virtually the same as at the beginning of the period, but their composition has altered, as they consist more largely of the company’s own manufactures, and, with the higher prices ruling for the raw material, their bulk possibly may be less. They amount to a sum approximately three times the gross profit, and in relation to the total assets, have risen slightly. Since 1918 the respective positions have been as follows, viz.:—

As a rule, the movements in stocks have coincided with those of the total assets. The latest period is an exception, however, and the small increase has occurred •when the total assets are down to their lowest aggregate in 10 years. The result is that it is necessary to go back to 1918-19 to find a smaller margin between the two, this showing that the recent treatment of the Hxed assets is having its effect.

Sundry debtors, with bills receivable, are down to £74,793. Against these, there is a reserve for bad and doubtful debts, the individual amount of which is not stated. After maintaining an even level for some years, their fall of nearly £20,000 may mean a quicker return for the sales, and a consequent reduction in the cash liabilities.

What exactly that reduction may be is. somewhat difficult to determine from the published statement of accounts. All the liabilities to outsiders are grouped, making a total of £182,007. No distinction is made between depositors and ordinary creditors, while the bank account, which presumably is also included in that group, is not even mentioned. As no distinction is drawn, either, between in-terest-bearing and non-interest-bearing items of indebtedness, the balance sheet can scarcely be said to be placed before the shareholders in a complete form. The matter of the amount of the deposits is an interesting one, since capital amounting to £75,000 still remains uncalled, while the progress of the bank balance usually commands the attention of all concerned. The one point shareholders know is that the aggregate of the outside liabilities has been reduced by over £46,000, but, as part of that sum consisted of £7756 in a contingency reserve, the question arises whether there may not be other items of a like nature in the group. It cannot fail to be gratifying to the shareholders to learn the change for the better that the latest statement records and, in the hope that the corner has been turned, they will look for further improvement in the days to come.

June 30 Paid-up Capital. General Bese ryes. Gross Profit. Dividend Pref. Ord. 1919 £115.350 £76,276 £59,911 p.c. 13 p.c. 13 13 1920 149,830 . 94,486 86,824 13 1021 179,932 98,025 81,924 15 15 1922 200.000 90,725 82,773 14 14 1923 200,000 92,896 83,051 14 14 1924 249,470 56,436 71,177 13 13 1925 254,887 60,811 70,346 10 10 1925 279,918 63,201 68,598 10 10 1927 294,936 64,083 65,378 10 10 1928 300,000 67,375 63,906 10 10

June Paid-up Net Beturn. 30 Capital. Profit. p.c. 1919 ... £115,350 £29,403 25.49 1920 149,830 36.526 24.38 1921 179.932 28,848 16.03 1922 ... 200,000 19,404 9.70 1923 ■. 200,000 .30,122 15.06 1924 249,470 31,536 12.66 1925 264.887 29 932 11.30* 1926 279,918 29,454 10.52 1927 v .... 294.936 29,487 9.99 1928 300,000 33,206 11.69

June'30-Paid-up General Net Dividend. Capital. Beserves. Profit. Pref. Ord. 1919 £300,000 £154,563 £49,717 p.c. 9 p.c.. . 10 1920 300,000 185,954 60,473 9 10 1921 376,265 196,032 37,931 . 7 8 1922 376,279 66,765 189,920 • 8 1923 376,279 41,038 121,125' 6 —. ' 1924 375,000 40,945 5,282 6 1925 375,000 — 191,464 6 —. 1926 307,500 12,778 4,274 6 1927 307,500 13,777 4,521 ' 6 •.Tnlv .19 1928 307,500 15,496 11,692 6 3

Stocks. Total Assets. Ratio p.c. 1918-19 ... £317.000 £541,236 58.57 1919-20 319,614 60G,758 52.67 1920-21 523,822 817,271 64.09 1921-22 425,760 690,293 61.68 1922-23 381,286 650,258 59.10 1923-24 453,251 732,498 61.88 1924-25 298,167 557,301 53.50 1925-2G 295,090 569,856 51.78 1326-27 285,566 553,880 51.56 1927-28 285,638 537,956 53.09