RESULTS ARE SATISFACTORY

NZ Truth, Issue 1179, 5 July 1928, Page 16

RESULTS ARE SATISFACTORY

JinaneialJJsviews

Auckland Gas Company, Limited, Inspires Confidence THAT INIQUITOUS TAXATION BURDEN

(By "Fiat Lux.")

The incidence of income taxation m New Zealand has been the subject of extremely adverse comment for many years, but for rank unfairness the continued freedom of electrlc-poroer boards from all income taxation is frankly iniquitous Token their only business r'wals, coal-gas purveyors, are all called upon to pay enormous sums annually under this heading.

THE Government has done wonderful work m carrying* out huge hydroelectric schemes, and, quite naturally, is keen to see the schemes themselves—and all subsidiaries thereof — rapidly become profitable. But great has been the injustice perpetrated that this end might be achieved. There is this question of income-tax, for instance, under which the consumers of gas m Auckland city have been compelled to contribute approximately £153,000 m tax m the last six years, against which consumers of electric energy from the Auckland Power Board, have contributed under the same heading exactly nothing. Discussing the results attained by the company for the year ended December 31 last, it can be said that they were satisfactory. Although the gross earnings were £13,691 less, at £474,507, the total operating expenses, at £386,180, showed a fall of £18,626. So that the net result at £88,327 was actually £4935 better than the 1926 returns. .< ■ This additional profit was required

opinion as to how this company arrives at the correct amount of each year's depreciation. •** ' ■ ii . *J rrj <w . . Pi PS « •fc fe,M a' !«s p .a _sfs P* to <5 o ca 1923 1,116,037 27,678 73,161 1660 1924 1,209,029 29,246 79,036 293S 1925 1,274,363 25,000 79,305 1023 1926 1,321.781 24,290 83,393 837 192.7 1,356,348 18,000 88,327 977 "Fiat Lux" has always been under the impression that the greater the value of the assets the more depreciation should be written oft! each year, but apparently the Auckland Gas Company, Limited, "has found a new method under which the provision for depreciation becomes less as the assets grow larger. It is quite a novel viewpoint and one cannot help wondering how bis: the

to meet the dividend on £54,676 of extra capital, which was paid up during the year. The net result of the 1927 trading

Usual Dividend

assets have to be before the necessity to provide depreciation disappears entirely! Joking apart, however, this critic

year was tnat tne company paid its shareholders the usual 8 per cent, dividend, adding £977 to its profit and loss carried forward, bringing: that account up to the comfortable total of £40,296. This should prove very handy for the equalization of dividends or any other emergency. The fall of £13,691 m the company's gross earnings was accounted for by reduced sales of gas, £9611, while residuals and fittings were less by £4080. The reduced sales of gas were directly due to three factors. For some years past the City Council has been replacing street gas-lighting with electricity. During the year under review, a .further discontinuance restilted m reductions of gas used for this purpose by £3600. ' Then discounts to industrial enterprises have had to be reviewed on account of competition. This has resulted m reductions totajlirig approximately £4000. Salep of gas by meter have fallen away slightly, due to the increased

i interprets the table of figures given above as indicating that the company i is following the lead of other affluent commercial concerns and is yearly creating considerable secret reserves by charging a certain portion of the extension work up to maintenance, thus lessening materially the amount of depreciation required. Some humorist was responsible for a parody on the old truism about words being given us with which to hide our thoughts: "Balance?sheets are published to conceal the financial position from the •public." That is why one frequently see's transactions m shares on the Stock Exchange at prices which are not warranted by the published accounts of the company concerned. Unfortunately, it sometimes happens that the man -m -. the -street thinks he knows a lot of good things about a company which are not published m the balance-sheet. He invests, therein at high prices, only to find later that the balancesheet . did disclose the real facts and

efficiency of modern cookers and other he has paid far too dearly for his domestic plant now installed by the shares. * company.' fl £° far as the majority of companies This pohqy of providing customers which are tested on Stock Exchanges with modern and efficient plant, re- go, it is pleasing to express the opinion suiting m considerable saving of gas that their published accounts generto housewives, is to be commended alJy understate the position, the direcand must result m the continued ex- tors preferring financial stability to pansion of the company's business, high dividends. since good service is the foundation This policy, generally, has much to upon which success is built. recommend it| since such "listed" comThe drop m turnover of residuals panics rightly enjoy the continued con-an-d fittings, of £4080, must chiefly be fidence and support of the investing due to residuals, the' present total of Public. which still bears the usual percentage . This company's share capital remains to gas sold as m the past, and, there- at the nominal sum of I*/. millions fore, should not occasion undue con- sterling, divided into £1 "shares of cern. , which 1,171,899 have been subscribed The decrease of £13,692 m the exr i° r and £1,111,629 has been paid up penses for the year, whilst undoubted-? leaving the amount uncalled at ly satisfactory, owes nearly £6300 to a £60,269. lesser charge for depreciation, which T ne unissued shares total -£ 328,101 "Mat Lux" cannot help but view with a figure which has been reduced from considerable- suspicion. ' £355.944 m 1923. . Especially so, m view of the fact that 'i During the year under review the company's plant, mains, buildfngs, £54,676 of has been paid un* etc., have increased, by £34,567 during all, of which was spent on buildings' the period, while . for the preceding machinery, plant, mains, services' period (1926). they, increased by meters and land. £-.47,417. The cpmpany is *me of the mn*t <& Hereunder is given a schedule get- 1 terprising concerns of its !.-in^ L""

ting out -(,1) tne balance-sheet valuation of plant since December, 1923; (2) the amount of depreciation written off

each year; and, (3) . the declared net profits for each year, 1923 to 1927 inclusive. ; ;■ : These figures make one speculate as to what basis the amount of depreciation is' assessed upon. ' The steadily: increasing yalue of the assets would appear to dispose of the idea that the amount of de- • preciation is assessed upon that figure, since the provision for the item has been steadily falling,: . whereas it shpuld surely have risen. Again, ,it (Joes not. appear to hear any fixed relation to the amount of net profit each yea*r, but it may possibly be governed by ' the amount of .profit left over each year after the usual .8 per cent, dividend has been provided .for. ■■".' '''■'..-.■' ' '. So that this theory may be tested, the amount of declared ntet profits remaining each yeg,r, after payment of the 8 per cent, dividend, has been shown: m- the analysis; f._ ■: With this .: additional information, readers wilL be able to form their own

Debenture Money

evidenced by the fact that during- the' year thirty -. five miles of new mains were laid and 3078 stoves

r ing the total m use up co 6Z,^__ No fewer than 1533 new consumers' were connected up, and their total now exceeds 46,000. Last year new capital was paid up to the extent of. £62,366, all of which was expended m extending' the company's operations. '7 •" " During the current year the p J,« y . ls r aisin 9 an additional *pp,opg |p debenture money for tpe same purpose. Another outstanding increase— and one which ''Fiat Lux" would like to ,s§e debarred by legislation— is ■ that of depositors, the total being £148,322, of ' wli.fch £21,373 was raised during the' ye^r under review. * — ' Tlie assets, of course, reflect these increases, buildings, land, mains and PJant having gone iip to £1,356,348 by £ 34,567. ' Investments have risen by £20,000 andTnow, ptand at £59,080. For some reason which^ is not at all apparent, the book debts have risen by £4995 and now total £7.3,798. Had the company's turnover increased, this could have been readily understood, but on a falling turnover it would be reasonable to expect this item to have come down. But thereit is. Do collections want attention' ■' ■The company's bajance-sheet has an air of strength about it which cannot help but instil confidence m the^ concern m the niinds of investors. ','Fiat Lpx" is of. the opinion that such confidence will be well placed strongly recom.men.ding these shares to all classes of investors. ','■' ■y - ***^i&*eK!m———m—m————m. ■.