WELLINGTON GAS COMPANY

Dominion, Volume 10, Issue 3005, 16 February 1917, Page 3

WELLINGTON GAS COMPANY

ANNUAL MEETING

AN INTERESTING REPORT AND DISCUSSION

The annual meeting of the Wellington Gas Company was held iu the company's demonstration hall r.t noon yesterday. The chairman (Mr. Win. Ferguson) occupied tho chair, and there was a largo attendance of shareholders. A summary of the annual report and balance-sheet has already been published. In moving its adoption, the chairman said:—The year 101G had been a peripd of great anxiety to the management. Expenditure had largely increased owing to the increased cost of labour and material; and, in consequence of tho inability to obtain pipes and other material, it had been impossible to extend the system of mains in order to provide a gas supply in the growing suburban districts. One hundred and forty-three chains of new mains were laid. The total mileage of mains now laid approximated 135 miles. After detailing tho now service the chairman said that by tho growing difficulties of domestic labour both the company and other gas companies had profited largely, and numerous houses were now being built in Wellington without any brick chimneys, and were deponent entirely for all heating purposes upon the supply of gas. The sale of gas had now exceeded 400 million cubic feet, and the greatest daily output exceeded one and a half million cubic feet of gas in, twenty-four hours. The increase in the sales of gas for tho year slightly exceeds ten per cent, an extremely satisfactory Tesult under any conditions. The increaso in the output a very definite effect on the cost of production of gas, as the whole of the management and general expenses were necessarily reduced per thousand feet of gas as tho output became larger. All indications pointed tt> an increase for some little time iu the cost of coal. The management feared difficulty in obtaining suitable supplies at moderate rates during the continuance of tho war, and this pointed to the wisdom of the course adopted in previous years in proviing an amount to bo,carried forward from year to year approximatinc; to the amount of one year's dividend, thus providing a fund from which, in time of special stress, dividends could bo maintained for a while. At the same time, the directors wished the members to bear in mind that tiro margin between the net earnings of the company, and the dividend of 10 per cent, was very small. This year tho sum of only £3000 had been written off for depreciation, and the amount carried forward had been reduced from vC21,514 to ,£20,3G0.

The dismantling of the old city works had been continued at a slow rate, owing to labour conditions, and only as the salo of tlie old plant demanded. No purchaser -was found' for the gas-holder for re-erection, which, after »3S years' service, was removed and sold for scrap; but other plant had been sold—some to Australia and some in New Zealand. An employes (Mr. John Kershaw), who bad been forty years in the service of ,the company, recently retired, and the directors recorded their appeciation of his- long and very valued services. Mr. David Anderson, who joined the board as a director in 1890, and had been constant and unremitting in promoting the interests of the company, retired ; from the board in Sentember r lasf. and the vacanov on the board was filler! by Che jjpnointment of Mr. Gerald FitzGerald. Mr. A. E. Brodie seconded the motion.

A Vanished Reserve. As an amendment, Mr. A. Warburton moved:—"(1) That the report and bal-ance-sheet be referred back to the board of directors for the purpose of recasting the "land, miramar, plant," standing in this balance-sheet at, =0415,866 3s. lid., to the sum standing in balance-sheet of December 31, 1914, ,£457,322 4s. 2d., plus such additional amounts as have already been added to this account since December 31, 1914. Such alterations in the several accounts to also be made so as to conform and work with the above. (2) That the report b° amended by stating "that last year's report was not adopted. (3) That this meeting expresses its wishes that no annual meeting be held less than fourteen days after posting the annual report and balanceIn speaking to the first amendment Mr. Warburton said he would like to refer to the additional profit that had been spoken This had been absorbed by the increase in> the cost of management, with the exception of ,£520. He thought it would be the duty of tho new board to use the pruning knife on tho expenses, and bring thru down as far as possible without militating against efficiency. Mr. Warburton also drew attention to tho fact that no reference was made in the report to the non-adoption of last year's report,, and said that the brevity of the time given between the issue of the report and the meeting, precluded any but those now on the Board of Directors consulting or taking action. No doubt the action of the directors was legal, but it was not conductive to confidence, and the fact that there was no mention of the ron-acceptance of last year's balance-sheet, made the one look as if the previous one had been acceptable .to shareholders. It would have been better had the decision of the last meeting been noted and not ignored. Mr. Warburton also made reference to the disappearance of the reserve of ,£44,000 (represented in the works in Courtenay Place), which would probably be the amount they would have appreciated if the goodwill were taken into consideration, an amount which, if added to the assets shown in 1914, would make the assets close on a quarter of a million. Instead of that the assets of the company had been reduced and the reserve had been swept away "in one fell swoop," and, in his opinion, the directors had acted very injudiciously and not in the interests of the shareholders. He also suggested that' the ,£lO shares should be cut up into .£1 shares. The holders would get tho same dividend as they did today, but the smaller denomination would mean that larger numbers of people would hold parcels of these shares, which would be of mutual benefit. Ho thought from the proposed Articles of Association that this idea had been in the minds of the directors. If tha.t were ' so he thought it would meet with the approval of the shareholders. .Mr. Ferguson made it clear that the reserve referred to was one created, a 6 a set policy of the bo.ard for several years to provide for the obsolescence of the'old works. When he joined the company nine years ago that was explained" to' him as the policy of the directors. Those works were only of value when gas was being introduced, but the instant they ceased to produco gas they became of scrap value, less the cost of taking them down. This matter had been placed before the shareholders year after year. At the meeting in 1913, reference ,was made to the works extension reserve, and it was shown how it was proposed to provide for the obsolescence of the old works without disturbing the company's finance. In 1914 the' chairman again referred to the subject, and the next year the company did actually write down tho old works by ,£IO,OOO. Mr. Warburton was present at that meeting, and by his silence gave no indication that the board's policy should not continue. Last year "the board continued its policy to its completion— the one it had outlined year after year— and wrote down ,£47,000 book value. It was only a book entry, and did not affect tho assets of the company one iota. AVhat wore the company's assets? The works, tho mains, pipes, and meters, as a going concern. Ho juined issue with Mr. Warbuton when he supposed that | a higher value- could be substantiated if the company sold or were forced' to make a compulsory salo. The purchasers would simply inquire into tho earning power of tho works, and what capital was involved to produco that earning power. In New Zealand thero was no special legislation to deal with tho methods of accounts as far as gas companies were concerned, but there were in other countries and such legislation would not permit of the accounts being kept in the manner Mr. Warburton had suggested. 'Regarding his reference to tho pruning knife as applied to the .cost of management, ho admitted that both receipts and tho cost of maJiagem.eßt;

had gone up. Tho only way to compute the cost fairly was on tho turnover, Wo price per ?000 cubic feet of gas sold. I,u 1002 this had been 2.81(1., and in l'JHi it was 2.08(1. His salary was added in the meantime, and confining the comparison to that term, the cost in 1007 was 3J(1., this year it was 3id., so tho costs had not gone up in tho way Mr. Warhurtou had been pleased to say they had. Mr. G. R. Wright asked further gucstions about tho reserve, which had disappeared, and was informed that it was merely.a book entry, represented on the works that had gradually become obsolescent. The chairman said that they had no reserve fund. The fact that they hud a debt of £50,000 should show that. Questioned about the raising of that moncv, the chairman merely said it bad been'raised on satisfactory terms, and interest was paid according to .ho Mr 'Gerald Ftzgerald said that he did not altogether agree with the writing off that had been done all on tho one side. He had favoured not dealing with the reserves until the war was over. In explaining his attitude, he said lie did not wish shareholders to think he had recanted from tho position he had taken up at the last meeting because he was sitting a few steps higher now than before. The directors themselves were not in agreement on the matter. He ■had to confess that he favoured the amendment of Mr. Warburtoir. _ If he did not they would be quite right in accusing him of inconsistency. He said that the goodwill was worth a good deal, and it did not appear on the balance-sheet. He .would have greatly preferred 'had the reserves been kept intact until the matter had been discussed a little more. Mr. H. Beauchamp said the practice which had been followed was tho one that was followed all over the world, and his view was supported by vv. Prendergast Knight, who said that they all a-reed, even Mr. Fitzgerald, that the reserve had to be written off at some time. They had a very yaluable franchise, but they did not know wliat monetary value to put upon iti On being put, the first amendment was defeated by 20 to 13 votes on a show of hand*; the second lanscd for want of a second; and tho third was carried. Subject to the final amendment, the report, which was seconded by Mr. A. E. Brodie, was adopted. . Messrs. A. E. Penrce, Harold Beauchamp, and Gerald Fitzgerald elected directors; and Messrs. B. A\ nerj foss and O. S. Watkins were re-elected auditors. A vote of thanks to the staff for the good work done during the year comnlpfpd the business.