Financial Reviews A SUCCESSFUL UNDERTAKING

NZ Truth, Issue 1184, 9 August 1928, Page 16

Financial Reviews A SUCCESSFUL UNDERTAKING

Runanga Co-operative Society, Ltd., Is Making Headway

MONUMENT TO ENERGY AND ABILITY

(By "Fiat Lux.")

From the published accounts for the half-year ended March 10, 1928, it is abundantly evident that the officials' at the head of the Runanga Cooperative Society, Limited, £non> their work- 'The results shown are a monument to their energy and ability. ' .

THEIR accounts certainly vindicate x the co-operative principle as applied to general stores; after the disastrous experiences of many such concerns during, the past seven years, It is very refreshing to find a' cooperative concern which is making such satisfactory, profitable and consistent headway. ; A few years ago the prevailing idea among those who controlled co-opera-tive ventures was that co-operation was a substitute for — nay, an advance upon — tried and proved general busi- s ness principles; consequently, the questions of providing adequate capital, building up reserves and observing other essential rules of business were jettisoned," to the ultimate destruction of many such concerns. Others which escaped complete destruction were saved only by reconstruction arid reorganization. Much water will, however, flow under the bridges before the people of the Dominion, particularly the primary producers, forget the enormous losses suffered m recent years m co-operative concerns of all kinds, including stook , and station ooncerns, freezing works, woollen mills, agency busl- ' nesses, eto. "Fiat Lux" is of opinion that it is a national duty to broadcast the results qf such a successful undertaking as the 'Runanga Co-operative Society, Limited to prove 'that past failures m cooperative effort were not due to any inherent defect m the principles of 06---operation, but rather to laok of sound business praotice m the application thereof. In the matter of the development of the natural resources of this glorious little country, which Nature has so richly, endowed, capital— and still more capital— will be required for development.. \ ■ ' The day has gone by when one man has either the inclination or the money to. go "alone into big ventures. 'It is essentially, an age of "spreading one's risks." , ; Co-operative effort of capital and endeavor is the essential of success today; nothing is better calculated to stimulate interest and influence capital into profitable channels than to broadcast particulars of really, successful enterprises, such as the concern now under review. : Admittedly, the Runanga Co-opera-

tive Society, Limited, is not an "investment" concern within the true leaning of the word, since the distribution of the profits is assessed not upon the amount of capital paid m by each shareholder, but upon the amount spent iii the business by each shareholder. This faot is the reason for the success of the venture, since its shareholders, by placing their business with their own concern, thereby inorease their own dividends. But the point for consideration is that the amount of capital contributed by each member at March 10 last, was equal to only £20/16/8. * Yet with even this modest sum per head, an „ overwhelming success has been achieved. This brings up the question as to whether it is worth while for the man m the street to make an investment of, say, £50 m shares m a limited liability company. It undoubtedly is, but always do your buying 'and selling through a stock exchange member, who is. best equipped With information to guide you; Many of the- big concerns m New Zealand, including the Bank of New Zealand, have an enormous list of shareholders; the average holdings m such businesses are '• generally under £100, so that because you have at i the moment only £50 to invest, don't be afraid that a ' stock exchange^ broker won't be troubled to do business wdth you. He will be pleased to see you— and your £50 or £100 will be very \ welcome m establishing some New Zealand, industry to the advancement of national welfare and to the ultimate profit of yourself. In the business under review, which was established m 1906 m the mining town of Runanga, four miles outside Greymouth, a number of separate departments are carried on. Whilst general groceries form the mainstay of the business, boots, drapery, bakery and carting also find a place m. the scheme of things. During the past few, years, 1 particularly, the business has gone ahead tremendously and the accounts for the half-year ended March 10 last show that the turnover and the net profits both constituted a record for the society. •."■■'■•.. The turnover for the six months totalled £20,889, against £16,974 for'the same period last year, an improvement of £3916, equal to £652 per month. As the membership showed an advance of only thirty-one members, it is evident that the society believes m going out after business and not waiting for the business to come m. > During the period under review,' the net profit' pn trading — quite apart from the- income from investments— amount-

A National Duty

Increased Profit

Ed to £2459, an increase of £414 over the previous similar period. The percentage of net profit : to sales was the handsome figure of £11.7 per cent. ' ■■•••.' For the period ended March, 1926, the net percentage was £10.4 per cent.; m September, 1926, it rose to ■£ 11.7 per cent.; and m March, 1927, it was £11.9 per cent., excluding interest on investments. . Working expenses for the ; period amounted to £2696, equal to £12.9 per cent, of sales. In September, 1926, this rate was £15.2 per cent., whilst by March, 1927, it had fallen to £14.5 per cent. Now there is another substantial fall. ..■•'.; <■...,-.■ The percentage of gross profit to sales for the period was the very satisfactory figure of £24.6 per cent. These percentages ' mean this— of every £100 worth of goods sold, £24 12s. (i.e., £24.6 per cent.) was gross profit! '■ ■- Put alternately, m every* £100' of sales, £76 Bs. represented the cost and £24 12s. represented the firm's total (or gross) profit. Out of this £24 12s. of gross- profit, wages, advertising, repairs, wrapping paper, depreciation and other working expenses required £12 18s. (i.e., £12.9 per cent.), thus leaving as the firm's net profit on each £100 of sales the amount of £11 14s. (i.e., £11.7 per cent.). . v "Fiat Lux" is wondering, how many general stores m New Zealand can carry on their business on ■ an expense rate of £12.9 per cent, and also show a net profit of £11.7 per cent., after paying wages to everyone concerned and all other expenses as well. Here are a few more interesting statistics. The average amount of each shareholder's purchases for the six months was £49 lie., and the average return to each shareholder, including interest on capital and a dividend calculated at 3/- m the £ on purchases, was £8 os. 3d; Not a bad return for a six. months' investment 1 of £20 odd, plus buying all your groceries, etc., at lowest rates. Further investigation proves that the stock is being "turned oVer" at the rate of over eight times per annum. This means that every £100 invested m stock is actually earning m. absolute

net profit for eaoh year, no less than eight times the percentage of net profit, i.e., £11 7s. multiplied by 8 equals £93 12s. No, they are not profiteers, but just a crowd of men running a business on real, earnest and sound business lines —and good luck to them. The balance-sheet of. the accounts under review shows substantial differences compared with the figures published a year earlier — i.e., March, 1927. The members' paid-up capital has increased by £1047 and now totals' £6896, which appears to be ample for the society's present activities. The reserves actually stand to-day at £6120, an increase of. £512 for the year, and only £1776 behind the paidup 1 capital. This would indeed gladden the heart of one very well known financial authority, who is chairman of a number of concerns m the Dominion's capital city, and who makes a hobby of building up reserves, both secret and disclosed, to the detriment of dividends; and the disgust of shareholders, who rightly believe that posterity should do something for itself. Leaving the' lighter side, however, this concern has built up reserves without unduly curbing dividends, while ■ its earnings for ' r the past half-year are equal to over £43 per., cent., on the paid-up capital and re- —— serves combined. As good as the best gold ;mines! The investment account is still shown as a jumble of figures. This writer has previously pointed out the desirability of setting out this account m a sensible way by classifying .the investments. At present it is not possible to ascertain from the published accounts m what channels of investment the society's £4320 is placed. During the year, investments have increased by £ 617, of which £ 681 was invested m Bank of New Zealand shares; a sound and sensible investment, too. Stock-in-trade is steadily rising m amount, the increase for the year being £1039, and the total at March, 1928, being £5792. Book debts, at £4196, continue to rise, the advance for the period being £659. This is equal to nearly £13 per member and is far too high, being over* five weeks' total sales. With the Vmajority of the shareholders receiving their pay every two weeks, this item should be about half what it is. ] "Fiat Lux" has no hesitation m describing this Item, as the weakest link In the chain. . ■ Another point worthy of attention m this', connection is the fact that no provision has been made for bad or doubtful debts. Don't they suffer from this trouble down on the Golden Coast? ' Seeing that several cash accounts are published, it Is a pity that the society cannot see its way to follow the orthodox method, putting the receipts and payments on the correct %ides of the accounts.