WRITING OFF LOSSES.

Star (Christchurch), Issue 17343, 16 July 1924, Page 7

WRITING OFF LOSSES.

BOOTH, MACDONALD & CO. “ HEROIC MEASURES.” “Heroic measures,” calling for substantial saennees by both oruinary and prelerentiai sharenoiaers, are proposed Dy the directors of ivaessrs hooui, Aiacdonald and Company, manuiacturers of ; agricultural implements, with a view t-o repairing tne attairs oi the company and enabling it to resume the> payment of dividends. Their proposals nave been communicated to siiarenoiders by letter and will be submitted to a sj>ecial meeting of the company in Christchurch on July 23. is a> suggestion in the directors’ letter that uniess these proposals are adopted the company might betorced into liquidation. I'or the first time in its history, the company had to announce an adverse balance for 1922. The loss on trading was £53,313, to which was added the amount of £5520, paid in interim dividends on preference shares at three and three and a quarter per cent respectively, making a total of £40,833. Against this were set the credit balance from the 1921 acocunt, £3517, and the reserves, £20.005, leaving a debit balance of £17,310. Trading operations in 1923 showed a further loss of £24,165, making a total deficit of £41,475. In addition, there was the contingent liability of respect of cumulative dividends on preference shares for eighteen months of £16,588. The directors make the following proposals:— (1) The ordinary share capital of £82,950 in £1 shares to be reduced to £41,475 in 10s shares fully paid, thus extinguishing the deficit of £41,475. (2) Holders of preference shares—£97,62B at six per cent, and £96,635 at six and a naif per cent—to relinquish their clams to dividends accrued up to December 31, 1923. (3) The rates of dividends on preference shares to be reduced, as from January 1, 1924, to five and a half per cent per annum, dividends to be noncumulative. (4) The rate of interest on mortgage debenuures—£llß,94B 10s, bearing interest at seven and a half per cent, free of income tax to 3s 2d in the pound—to be reduced by one per cent. SLOW improvement. The circular to shareholders states that, though the last few months have shown an improvement, it has been less than was "%ioped. Considerable gains may be made before the year ends, but the leeway is very formidable. It would take many prosperous years to work off the severe losses that have been made, and prosperous years cannot be guaranteed. “It is deemed best to face the position squarely, and to write off the loss at once and make a fresh start with a clean sheet and under less onerous conditions.” The proposals as summarised are explained in detail. It is stated that the reduction of the preference dividends will reduce the burden on the earnings of the company to £1364 a year, and allow the building-up of a reserve fund against future contingencies, in case surplus profits are available for that purpose. The reduction in the rate of debenture interest will further relieve the company to the extent of about £I2OO a year. LOSSES DUE TO EXTERNAL CAUSES. The directors believe that the proposals are in the interests orf all shareholders and debenture holders and of the company as a whole. “At the present time shares of all classes are practicably unsaleable, and debentures are being offered at very low prices,” says the circular. “The sooner the affairs of the company can be put on a safe basis, the sooner will a profit-earning stage be reached, and the sooner will debentures and shares recover fair market values. The sacrifices that are proposed are trivial in comparison with the probable losses to all concerned if the company should be unable to carry on successfully. It w'ill be realised that the misfortunes wdiich have overtaken it have been due to external causes, which have affected many similar concerns, both in New Zealand and abroard. There is, however, no reason to doubt that recovers is possible if due precautions are taken and the overburden lightened in the manner suggested. Directors wrongly urge that these proposals be adopted, and in that case x the board will be encouraged to exert themselves to tho utmost to restore the business, with the least possible delay, to its normally prosperous condition.”