COMPANY PROGRESS.

Otago Witness, Issue 3888, 18 September 1928, Page 73

COMPANY PROGRESS.

THE NEW ZEALAND FARMERS’ COOPERATIVE ASSOCIATION OF CANTERBURY, LTD.

The annual statement now placed before shareholders records a net profit of £38,251 for the period, or nearly double that of the preceding year; While the improvement is satisfactory as bringing out the best result for several years, it may be asked if, in view of the company’s past experiences, it is advisable to distribute nearly two-thirds in dividend as is being done in the present instance. Desirable though it may be to make up dividends due on those shares which have cumulative preferred rights, it is more desirable to strengthen the position of the business. A bank overdraft of £73,588 is only one, and not the largest, of the items of indebtedness, and to increase it by £24,000 by paying a dividend for two years on the first preference shares and for six months on “ A ” preference shares seems to savour of undue haste to recover lost ground. When a sum of £9OOO is appropriated for writing down the fixed assets and £lO,OOO set aside to form a special reserve fund, an aggregate’ of £43,000 is disposed of, which means that the balance brought from 1926-27 has to be called upon to furnish nearly £5OOO after-the latest year’s surplus is disposed of.

Although as usual full details are given in the printed accounts, it may be noted in regard to the subscribed capital that the matter of cumulative preference is not mentioned. The assumption is that all the preference shares are cumulative as regards dividend. Holders of certain sections were asked in the pasl to forego their claims to a dividend, and while the holders of first preference shares will, if the present proposals are carried out, see their dividends brought up to date, there are the dividends outstanding on the “ A ” and “ B ” classes still to satisfy. A timely reminder to that effect is inserted in the directors’ report, from which holders of ordinary shares may gather that some time may yet elapse before they can hope to see any return on their holdings. < At £187,091, the gross profit comes out at practically the same as a year ago. Strict economy continues to be exercised in the general expenditure which, apart from taxation, amounts to £138,097, salaries and wages forming the bulk. Retrenchment has succeeded retrenchment, and it is to that policy that the present increase in profit is due, as the gross return falls short of those of two and three years ago. Among the liabilities, the greatest curtailment has taken place in the bank overdraft. Deposits show a reduction of some £31,000, which is partly counteracted by the rise- of approximately £19,000 in the fixed deposits. It is in shareholders’ current accounts, however, that the chief increase has taken place, the .rise of nearly £50,000 being a reflection of the smaller bank overdraft. The liability on share--holders’ current accounts is a fluctuating item which had become considerably diminished, and the reflex movement may be an indication of renewed confidence in the association. A comparison of the main items of indebtedness for the past three years is as under, viz.:—

It is apparently not anticipated that there will be any difficulty in securing a 10 years’ renewal of the secured deposit stock, two-thirds of which falls due for repayment in 1930. The decided drop recorded 12 months ago has been followed by another of six figures, which speaks well for the progress made, and must be regarded as gratifying. It is the group containing advances and sundry debtors that has to be looked to as the mainstay of the assets. After reserves of £96,487 have been deducted, the net total is £1,110,197. Nearly £1,000,000 is held in advances, and presumably it is to them that the reserves are chiefly directed. A decrease of approximately £llO,OOO in the group may be the result partly of realisation, although the disappearance of the sum of £185,830, held in reserve 12 months ago to be applied to ascertained losses, has probably exercised an effect. The task of finding out accurately the bad and doubtful debts of the past may well be one that even yet cannot be accomplished, and time alone can show the full extent. Meanwhile, reserves continue to be augmented. It may be presumed that the allowance in the past year’s accounts of £5340 was mainly, if not entirely 'applicable to advances and sundry debtors incurred since July, 1927.

At £325,331, stocks are slightly down. If that figure represents an average throughout the year, it illustrates the large sum tied up more- or less permanently in a form which must be subject to depreciation, if held for any length of time. The reduction of the bank overdraft has not been made at the expense of deplenished stocks. In their relation to the gross profit, stocks stand in much the same position as at July, 1927, holding the gross profit and some 75 per cent, over.

The fixed assets are divided into three groups, t of which freehold and leasehold property, at £392,032. net, is easily the largest. They have increased by over £BOOO, thanks to a reduction in the relative mortgages. Alterations to premises .have been entered separately at £24,497, but the recommendation is that £9OOO be written off out of the surplus. Apparently it is not considered necessary to provide directly for deterioration on buildings. An allowance of £1869 has been made for wastage of plant, the value of which is

not stated separately, but is part of the £64,303, embracing also warehouse fixtures, furniture, and machinery. The total of the fixed assets is £480,832, or about one-fourth of the total assets. The evidences of returning prosperity are a pleasing feature of the accounts, and it is hoped that, thanks to the somewhat drastic steps taken a few years ago, the association may look forward to an era of comparative success after its lean spell,.

THE NATIONAL BANK OF NEW ZEALAND, LTD.

A further shrinkage has taken place during the past year bringing the net •profit down to £289,803, a smaller gross profit and larger expenditure each playing a part in the reduction. Payment of the customary dividend of 12 per cent and bonus of 2 per cent, leaves a balance of £9803 to meet transfers of £20,000. The floating balance is accordingly depleted by the difference, the amount carried forward being reduced to £165.572 The chairman at the recent annual meeting stated that the Dominion’s recovery from two years’ depression did not set in until November. The bank’s financial year closing' at the end of March would not permit the full advantage of the recovery to be received, but 1927-28 will have the benefit of four or five months of improving conditions, whereas 1926-27, a full period of depression, brought out a higher profit. Expenditure shows a tendency to rise in relation to income. The balance of gross profits brought out is lower than that of either of the preceding two years, and is accompanied by a rising expenditure. For the past five years the two have compared as under, viz.:—

The decided advance in expenditure of the - past two years has caused a return to the positions occupied prior to 1925-26, in which year the relation was specially favourable. Reserve fund and paid-up capital remain at the same figure of £2,000,000. Apparently the former' is considered equal to all claims upon it, as nothing out of the past annual surplus has been allotted to it. As any fresh issue of shares seems to command a 100 per cent, premium, it is unlikely that capital will' outstrip it. A further £165,572 is provided for reserves by the floating balance, while the miscellaneous group of liabilities contains further contributions of a stated nature but unstated quantity Although the amount comprised by bills payable in the aggregate of £1,384,647 of that group is not given, it may be assumed that the greater part at any rate of the drop of over £650,000 since March,. 1927, is attributable to them. Notes in circulation, at £1,173,482, continue to mount steadily, but not faster than the claims of an enlarging business would appear to demand. The more permanent investments are placed in British and New Zealand Government securities, which have increased some £150,000, and now exceed the reserve fund. The cash at bankers’ group, including short-time investments, has grown to £1,110,334, or almost threefold, while coin and bullion have fallen to £968,053. The protection afforded to the permanent investments on this occasion stands in striking contrast to the position of March, 1927, when the money available for quick realisation was small. Bills discounted show little alteration, but bills receivable have risen to £3,732,394, considerably exceeding all other assets except advances. < New bank buildings in Wellington and Palmerston North have apparently affected the fixed group of assets. The increase of over £70,000 in one season is accompanied by a writing down of £lO,OOO as against £20,000 in the previous year. It would seem that the higher the value the fixtures attain the smaller the sum written off. Even so, the book value of the properties at £572,152 is doubtless well within the market value. The past six years have given a total writing down of £150,000, which may be looked upon entirely as additions to reserves. However satisfactory it may be fromthe general community’s point of view, to find bank advances decreasing and deposits increasing, the altered conditions n.ust be reflected in the banking profits. As the banks themselves took the initial step to increase deposits and reduce advances over a year ago, it may be assumed that they did not consider that such a move would prove detrimental to their interests. The larger volume of money at its command as a result seems in the case of the National Bank of New Zealand ’to have found, its ‘ way largely into cash at bankers and short-term employment, which will yield a lower rate of return than that given by advances, and, one would consider, will exercise an injurious effect on the bank’s profits. Deposits have increased to £12.088,015, and advances have fallen to £9,212,388. The additional £1,700,000 odd in hand has thus not been acquired at au even rate of interest, as, roughly, £BOO,OOO has been obtained at deposit rates while the balance has cost advance rates. The relative positions of advances and deposits at each closing date since 1920“ has varied as follows, viz.:—' March Ratio

Four years ago the ratio was even more in favour of deposits, when the figures concerned ’were over £600,000 smaller. The alteration in the position then from that of March, 1921, is very striking. Since the accounts were closed, a fall has taken place in the rates of interest on both advances and deposits. The effect will be closely watched.

Paid-up Fixed dep. Res. dividend Carry July 31 Capital & bond issue Fund 1’ref Ord F’rw’d £ £ £ p.c. p.c £ 1919 ... 638,867 553,913 170,000 6 8J 8,610 1920 ... 772,639 605,071 178,081 6 8‘ 12,061 1921 ... 883,821 1,216,065 190,000 6 7 2,267 1922 ... 883,974 1,169,700 131,134 6 4122,228 1923 ... 879,924 1,060,184 8,907 4214,156 1924 ... 879,924 1,037,493 — — 4101,929 1025 ... 972,341 1,027,082 — 3 496,073 1926 ... 887,335 1,000,258 — 4338,912 1927 ... 539,181 944,069 — *6 — 21,773 1928 ... 539,414 932,017 10,000 6 — 17,024 * On first preference .shares only. 4 Debit balance

1925-26. 1926-27. 1927-28. Bonds ... £530,000 £530,000 £530,000 Deposits ... 4G5,395 411,602 380,490 ■fixed deposits ... 4,863 2,468 21.527 Shareholders’ current accounts '• ... 244,824 192,950 243,738 Sundry creditors ... ' 54,463 57,736 63,228 Bank ... 306,816 233,370 73,588 £1,606,361 £1,428,126 £1,312,571

*Div. March Paid-up General Net cum 31 Capital. Reserves. Profit. bonus — p.c. 1921 £1,000,000 £1,155,894 £326,821 14 1922 1,000,000 1,192,121 212,726 14 • 1923 1,250,000 1,405,567 228,745 14 1924 1,250,000 1,425,558 243,935 14 1925 1,500,000 1,647,698 279,826 14 1923 2.000,000 2,173,014 333,087 14 1927 2.000,000 2,175,769 312,275 14 1928 2,000,000 2,165,572 289,803 14 * Free of income tax.

Expenditure. Gross Profits. Bat io p.c. 1923-24 ... £359,400 £603,335 59.57 1924-25 ... 351,536 631,362 55.68 1925-26 ... 354,037 687,124 51.52 1926-27- ... 379,993 692,268 54.89 1927-28 ... 394,538 684,341 57.65

31 Advances. Deposits. p.c. 1321 .. £10,560.232 £ 8,296,492 127.29 1922 8,880,232 8,243,238 107.72 1923 8,218,120 9,2G1,899 88.73 1924 8,505,465 11,442,153 74.33 1925 8,905,738 10,822,912 ’ 82229 1926 10,023,506 10,438,468 96.02 1927--10,192,821 11,283,316 90.34 1928 ■ 9,212,388 12,088,015 76.21