AN EXPLANATION.

Southland Times, Issue 21560, 25 November 1931, Page 3

AN EXPLANATION.

To the Editor.

Sir, —There recently appeared in your columns a Press .Association cable announcing the fact that the Austin Motor Company had declared a dividend of 100 per cent. This information has been cabled you in such a form as to infer that the Austin Motor Company had paid 100 per cent, dividend on the whole of its share capital. The impression thus created in the minds of the public and the users of Austin cars in New- Zealand is one that is hurtful to our business, and has resulted in direct criticism, in which it is suggested the company has extorted unreasonably high prices from the public in order to make such a dividend possible. This impression is created as the result of the form in which the information was cabled, and which I might say is very wide of the facts, which I feel sure you will give me this opportunity of now stating correctly, as follows: The dividend of 100 per cent, was paid by the company, but only on ordinary shares. It places a very different construction on the position when a further explanation shows that the ordinary share capital of the company only amounts to £150,000 out of a total share capital and stock amounting to £3,412,374. It is also necessary to point out that all the share holdings other than ordinary shares are preferred or debenture stocks, on which a fixed rate is payable prior to there being any accumulation of profit for the ordinary shareholder. During the past eleven years the ordinary’ shares have carried the brunt of all the difficulties which faced this, and other motor manufacturing concerns in England, in their efforts to reconstruct after the war, and in the case of The Austin Motor Company ordinary shares, in the period referred to have been written down from 20/- fully paid to their present book value of 5/-. Moreover, during the period of eleven years the ordinary shareholders have only received divi. dends on two occasions, whereas the preference shareholders, and stockholders have been fully paid, and consequently if the general meeting of the company considered it reasonable to give the ordinary shareholders a dividend, which on book value amounted to 100 per cent., but on original cost of the shares meant 25 per cent., it is surely, in view of all the circumstances set out above, not more than was due. Another important aspect of the matter is that during the period referred to, and especially since the McKenna Duties were introduced, the company has annually made important reductions in the retail prices of their products, and has passed on to the public a larger measure of their success than was passed on to the shareholders. The reductions in prices made since the McKenna duties were introduced equal 65 per cent., and in this connection provision has been made in the current year to make still further reductions, which have already been announced. I feel sure you will agree that the above explanation is necessary in view’ of the wrong impression created by the Press Association cable which appeared in your columns. —I am, etc., G. H. SCOTT. N.Z. Representative. Wellington, November 11.