NEWTON KING, LTD.

Taranaki Daily News, 22 July 1929, Page 14

NEWTON KING, LTD.

REDUCTION OF CAPITAL TO MEET PAST LOSSES. > PROFITABLE YEAR’S TRADING. The directors of Newton King, Ltd., have brought down proposals for consideration of shareholders on the 31st instant to reduce the company’s calledup capital from £374,695 to £205,029. This is to be done by: — (a) Cancelling paid-up capital which is unrepresented by available assets to the extent of 17s in respect of each of the 200,195 ordinary shares which have been issued, and are now outstanding, and .by reducing the nominal amount of such ordinary shares to 3s per share.

(b) Cancelling 49,255 of the existing ordinary shares which have not been taken or agreed to be taken by any person. (c) Cancelling 550 of the existing ordinary shares which have been issued and forfeited.

The directors also propose that all arrears of the cumulative preferential dividend, whether declared or not, on the 174,500 issued preference shares accrued up to April 30, 1929, shall be cancelled and extinguished. In their annual report the directors state that a’ the last annual meeting they intimated that in order to place the affairs of the company on a stable basis a reduction of the capitalisation of tne company was inevitable, and they now advise to that end they engaged Messrs. Beet and Wilkinson, public accountants, of Christchurch, to undertake the investigation, after Messrs. Clarke, Menzies, Griffin and Ross, of Wellington, found themslves unable to carry out the work. Their work has now been completed, and their conclusions and recommendations are embodied in a separate report. This report covers the whole ground, and shows the reasons for the conclusions arrived at. AUDITORS’ REPORT. Messrs. Best and Wilkinson state:— “Acting on the instructions of your directors, we have conducted a complete and thorough investigation of the company’s affairs with a view to reconstruction on the basis of present day value of its assets, so that in future there may be a reasonable prospect of the company earning profit commensurate with the true capital employed in the business. At the inception of the company the assets were, no doubt, capitalised on the basis of values ruling at that date, but since that time there has been a considerable deflation in values, in consequence of which the company today finds itself in possession of assets which are not worth the values stated in the books. This decline in values has been due to causes beyond the control of the directors and management of the company. Furthermore, it is not possible to make provision for this fall in values in the annual accounts of the company. “The greatest care has been exercised in the re-valuation of the assets, and, as a result of our investigation, we recommend that the sum of £170,165 15s be now provided to meet the abovementioned declines in values. We have recommended to the director's that this amount be dealt with by writing down the ordinary paid-up capital of the company from 200,195 £1 shares, fully paid, to 200,195 ordinary shares 3s fully paid, and,the directors have unanimously approved of this scheme. “The Memorandum of Association of the company provides that in regard to the preference shares they are to be preference as to capital as well as to dividends, thus it is not possible to ask the preference shareholders to accept any writing down of capital until the' whole of the 5 ordinary capital has been absorbed. There is, at the present time, however, three years’ dividends due to the preference shareholders amounting to £34,027 10s, and we have recommended to the directors that the preference shareholders should be asked to forego these dividends and so enable the company to start afresh. We feel that we are quite justified in doing this, as the preference shareholders are not suffering any loss of capital, and we feel sure that they will readily agree to forego the accumulated dividends. “Shareholders will naturally be con* cerned as to what are the prospects for the future. We have carefully studied the past history of the company and are satisfied from present indications that there is every reason to believe that if the proposals now placed before you are carried the company has a prosperous future ahead of it,, and shareholders can look forward with confidence to receiving dividends yearly, unless something unforeseen occurs. “We would like to point out to the ordinary shareholders that the nominal value of the shares is not so important as is the question of what return by way of dividends one is receiving from the capital invested, and it is better to receive a dividend on 3s than nothing at all on 20s. “We have made it our business to meet as many members of the staff as possible, both indoor and outdoor, and we have no hesitation in saying that we have been much impressed by the ability, energy and loyalty of the staff as a whole. We recommend the proposals placed before you to your earnest consideration, and trust that you will see your way clear to accept them.” £23,424 PROFIT FOR PAST YEAR. The directors, in their report, state that the net trading profit for the year amounted to £23,424, practically the whole of which has been utilised as part provision for the reduction in the scheme of capital re-organisation. “Owing to the intensive overhaul and investigation of the company’s assets durin" the year the directors can confidently inform shareholders they consider that in arriving at the figure of net profit as shown, every uncertain factor has been taken into consideration, and substantial reservations made for all doubtful earnings which should be provided for,” continues the report. “The directors state the very much better year experienced by the company has enabled it, in spite of these necessary reservations, to still show a bedrock net profit greater than the previous year. “An examination of the accounts now published, will reveal to shareholders that during the past two years a large amount of consolidation work has been accomplished and as a consequence, the liabilities of the company compared with 1927 balance-sheet show a total reduc-

tion of £132,857. That this result has not been achieved at the expense of the earning capacity of the business makes it all the more gratifying. INVESTIGATION OF ACCOUNTS. i “The investigation and overhaul of the company’s assets has been most thorough and comprehensive, and your directors agree with the investigating accountant, Air. AV. E. Best, when he says that if the recommendations as submitted by him ace given effect to, all assets will have been written down to a true value and the capital remaining in the business should be live and effective and, as a consequence, the company should be in a position to face the future with confidence, freed from the incubus of over-capitalisation and accumulated losses. “The trustees in the estate of the late Air. Newton King have indicated to the directors that in view of the position in which the company now finds itself they propose to apply to the. court to sanction a proposal under which they will be enabled to afford some measure of relief to the company in connection with the item of goodwill. At the moment the nature and the amount of the relief cannot be advised, but it is anticipated that a definite statement regarding this matter will be placed before shareholders at the general meeting.”

The balance-sheet shows liabilities to be: — f 250,000 ordinary shares of £ s. d. £1 each 250,000 0 0 250,000 64 per cent, cumulative preference shares of £1 each 250,000 0 0 500,000 0 0 Less unallotted shares — Ordinary 49,255 0 0 75.500 0 0 124.755 0 0 Subscribed capital 375,245 0 0 Deduct shares forfeited .. 1,325 775 0 0 Less shares re-issued .... 0 0 550 0 0 Issued capital called up 374,695 0 0 Less calls in arrear ... 6 5 0 Paid-up capital 374,688 15 0 Mortgages on properties Bank of N.Z., including 20,340 0 0 unpresented cheques .. 165,453 11 2 Bills payable Sundry creditors, trade, 245 10 3 current & deposit accounts • • 50,589 13 0 Newton King Estate Account 78,762 18 2 Forfeited Shares Reserve 181 4 3 Balance at credit of Profit and Loss Appropriation Account 450 18 6. £090.712 10 4 Contingent liabilities — Bills under discount .. Under guarantees given 3,258 37,818 11 3 by the company 7 2 Arrears of dividend on preference shares (three years) 34,027 10 0 Assets are set down as:- £ s. d. Freehold and leasehold properties, buildings & yards 113,977 17 2 Machinery, plant and office furniture 27,018 13 9 Goodwill 30,000 0 0 Stocks of merchandise, motor-cars, . machinery, etc., on hand and in transit ;. 67.293 1 10 Shares and investments Sundry debtors on open 1,025 0 0 accounts 439,918 15 11 Lilis receivable 11,372 11 1 Cash and stamps on hand 106 10 7 £090,712 10 4