WELLINGTON INVESTMENT, TRUSTEE AND AGENCY COMPANY, LIMITED

NZ Truth, Issue 1149, 8 December 1927, Page 17

WELLINGTON INVESTMENT, TRUSTEE AND AGENCY COMPANY, LIMITED

Comparative Balance- Sheet, June 30, 1927.

ASSETS.

LIABILITIES. ASSETS. , o „ „ Ar o„ „ Capital paid up 62,000 — Mortgages 187,605 '3412 Reserves ... 26,932 *594 Interest 1882 +774 Profit and loss -...„ 3002. t649 Freehold property .... 4029 +193 Office furniture 122 +22 Shareholders' funds . . 91,934 +255 Debentures and stock 33,020 +65 Deposits and interest 136,526 +1127 Bank 2320 +1010 Subscriptions 285 +1153 Special deposits .......«« — t4OOO Creditors „..,«.: :.:«...: 233 +117 £228,978 +2653 4228.978 t2852 Note: • Indicates increase and + decrease oompared with last year's figures.

£62,000 so the company has available a further £ 62,000 of uncalled capital of which the management, at least since 1922, has apparently made no use whatever. The curious reader will probably asK what possible use could be made of uncalled capital and the answer Is that It could be pledged to the company's bankers as security for an overdraft which should be used to absorb the shock of the ebb and flow of the demand for advances made upon the company. From the published accounts dating from the end of the company's 1923 financial year the following bank credit balances are disclosed: £ June 30, 1923 .......... 4813 June 30, 1924 ........... 6584 June 30, 1925 ........... 6056 June 30. 1926 3121* June 30, 1957 „,, 2320 •Also special deposits of £4000. The logical deductions to be derived from these figures are: A. — That the company makes a regular practice of maintaining a credit balance m its current banking account; and B. — That the foregoing being considered as an established fact clearly Indicates that the management is pursuing an ultra-conser-vative policy. For the five years for which the bank credit balances are given, the average credit balance — exoluding the £4000 of special deposits which would be earning interest— amounts to £4500. which would, of course, be non-Interest earning. Assuming the oompany*B average rate of gross earning to be 7% per cent, the daily loss m interest on this item alone would amount to about £333 per annum. Clearly the remedy ls to establish bank overdraft accommodation on the security of the uncalled capital and this would enable the company to make the fullest possible use of all its available funds all the time. From the point of view of service to the community and returns to investors this critic believes that the several concerns of similar nature carrying on business m the principal centres should be amalgamated m each centre. Thus Auckland, Wellington, Christchurch, and Dunedin would each have its own one well-capitalized, sound and substantial financial institution which would be a big power In local development and which could Indubitably be worked upon a much smaller expense ratio than the existing number of small concerns. Taking the purely administrative charges such as salaries, rent, office expenses, directors' fees and all similar charges these accounted for 12 per cent, of the gross Income m 1924, but m 1927 substantial economies had been effected which resulted m reducing this rate 9.6 per cent. Had the company's earnings been largely increased as would be the case if an amalgamation as suggested herein were consummated then the expense rate .would .again be substantially lowered as very few items of expense increase In direct ratio to turnover or gross earnings. The company has built up reserves

Bpent by many ooncerns ln reorganizing their financial affalrß and calculating and writing off losbos made on advances effected m 1920 and onwards the results ln this case can be considered highly satisfactory. In either case the value would appear to be altogether m favor of the company. Debentures, insorlbed stook and aocrued interest on debentures total £38,020, praotlcally the same amount as last year. These securities are liquid inasmuch as they can be converted into cash upon the open market at any time and the amount used to invest m mortgages, so the company has easily available ample funds for its legitimate business of advancing money secured by mortgage. j The company's shares are quoted on [ the open market at slightly over par i which reduced the return thereon from the dividend rate of 6% per cent, down to about 6% per cent. The company appears to be very soundly, if somewhat conservatively, managed and its prospects are good. | Therefore, "Fiat Lux" has no hesitation whatever ln strongly recommending this concern's shares as an investment to those who desire a fair rate of return coupled with absolute security of capital.