COMPANY PROGRESS

Otago Witness, Issue 4048, 13 October 1931, Page 65

COMPANY PROGRESS

THE NEW ZEALAND GUARANTEE CORPORATION, LTD. Paid-up Capital: 1925. £l7B,0 Q - 1926-31, £214,390.

8 per cent, on allotments subsequent to February 2.8. 1925. The influence of the financial depression upon the past year’s result is evident. lhe net profit which for the previous five seasons had been maintained at a consistently’ satisfactory figure, has dropped to £lllO. or insufficient to meet the / per cent. ,dividend upon the preference shares. The recommendation, however, is to pay the usual preference dividend, and what is equivalent to 5-5/24 per cent, upon the ordinary shares. To enable that to be done there is to be withdrawn from reserves the sum of £lO,OOO, of which £1489 will be left, after the distribution is made, to carry forward to the current season.

The smaller turnover is not diie to want of applications for loans, but to lack of the desirable security’ for those offering. The gross profit is reduced to £39,192, or by approximately one-third from that of 1929-30. The necessity for full provision for doubtful accounts has concurrently increased the expenditure, so that the net surplus . has been affected by both sides. Expenditure is divided into two groups the general one amounting to £6866. while bank charges, doubtful debts, and income tax account for £31.216. The relations of expenditure to gross profit have stood as follows:—

Before 1936-31, expenditure had been tending to rise, and in three years has nearly doubled. Liabilities to outsiders occupy a comparatively small place. The largest is the bank overdraft, which, with interest accrued, comes to £2897. As £lO4B of that sum represents interest, the substantial reduction in the loan is apparent. At this time the reduced amount borrowed from the corporation has enabled all suitable applications to be met almost entirely from the corporation’s own resources, so that extensive recourse to the bank has been unnecessary. Although a reduction in the total indebtedness has followed, it may be that from the corporation’s point of view a larger overdraft from the bank would be more satisfactory. Sundry creditors add only £llB7 to the outside liabilities. Deposit accounts have fallen to £3822, their services, like those of the bank, being less in demand. If the directors’ recommendations regarding the dividend are adopted, general reserve will stand at £25.000. A further £1489 is contributed by the floating balance. bringing the total of general reserves to £26,489. The fact of depleting reserves to pay a dividend, as far as the ordinary shares are concerned, would seem to indicate an optimism on the part of the management that it is to hoped is well founded.

In total assets of £254.004, the fixed section represents only £395. This is for furniture and fittings on which a depreciation allowance of 10 per cent, has again to be allowed. The portion of the investments earmarked for sinking fund is entered separately at £11,052, giving useful support to the general reserves. The important item—one that overshadows -he rest —is the group containing sundry debtors, bills receivable, and investments entered at £242,495. The large reduction that has occurred in the amount has materially altered the balance sheet, but it is not shown in which direction the reduction has chiefly taken place. There is nothing to indicate what portion of the total is composed of sundry debtors and bills receivable, but. presumably, the shrinkage is mainly' attributable to them. There must have been extensive realisation during the year to cause so considerable a drop, and at the same time to enable the bank overdraft practically to be cleared off. _ That the deficiency caused by the realisation has not been made good is merely’ a sign of the times. It is not clear why investments are held separately to be distinguished from those earmarked for reserve.

There is no difference in the capital which has remained at its present figure for five years. The great bulk of the shares is part-paid, involving a liability of 12s per share. As the directors’ report points out, it is unlikely that the .balance or part of it will be called up m the near future, the present funds being ample to cover the business offering.

General Dividend. Aug. 31 Reserves. Net Profit. Pref Ord. £ £ 1925 .. .. 1.8.490 15.980 7 *10 1920 .. .. 21,470 24,629 7 10 5-12 1927 .. .. 20.418 21.150 •• 8 1928 .. .. 25.691 22.872 7 8 1-3 1929 .. .. 31.298 23.206 7 8 1-3 1930 .. .. 36.903 23.203 7 8 1-3 1931 .. .. 26.489 1.110 7 5 5-24

Expend!Gross ture. Profit. Ratio. £ £ P.O. 1924-25 .. .. .. i-.eio 34.552 51.05 1925-2G .. .. .. 22.563 51.794 43.56 1926-27 .. .. .. 24.521 50.274 48.77 1927-28 .. .. .. 21.698 44.570 48.68 1928-29 . .. .. 28.089 51,295 54.76 1929-30 .. .. .. 34.462 57,665 59.76 1930-31 .. .. . . 38.082 39,192 97.17