SHARES ARE WORTH CONSIDERATION

NZ Truth, Issue 1189, 13 September 1928, Page 19

SHARES ARE WORTH CONSIDERATION

*Jinanetal^views

Auckland Amusement Park Should Create Substantial Reserves

(By "Fiat Lux. 11 )

"'Flat Lax' believes the directors have acted altogether too handsomely m paying out 25 per cent' on ordinaries and 15 per cent on preferreds. ", The^ foregoing is an extract from last year's revieto of the Auckland Amuse ment Park, Ltd. and a debit balance m this year's profit and loss account ls}i unfortunate confirmation of this writer's opinion. , • ; <

FQR the year under review, v ending on January 31 last, the gross earnings of this concern, which adds to the gaiety of life m the Queen City during the summer months, amounted to £20,794, against £24,580 m 1927, a decrease of £3786— equal to nearly 11 per cent, on the whole of the paid-up, capital of the company. The running expenses for the 1927 year were stated at £ 14,165, but it has since been found necessary to provide the following additional amounts m respect of. that period: Depreciation, £ 319 ; directors' fees, £ 750 ; auditors' additional fee, £26; so that the corrected expenses for 1927 amounted to £15;260; -.. ■■ : Against this, the 1928 expenses amount to .£20,028, an increase of £4768, so that the total difference" between the first and second years' operations of the concern prove the second year, to be no less than £8554 behind .1927. * In addition, it is not at all clear Whether the published accounts for 1928 include provision for 1928 income-tax, directors' fees and preference share dividend. , The ..root.. cause 'of the* setback is simply' that Auckland has not; a sufficiently. , Jarg£- floating population, to keep such. aVhigh^class and. expensive, concern. at LunavPark going.. .■ : ; The first .'■ year's operations ..were, highly successful financially, because the 'show was a novelty to Auckland's, entire resident population. After, the first year, however, the ; novelty had worn off and no ' doubt thereafter residents patronized the show only when jtheyhad to provide entertainment for. visitors. This appears to the writer to be borne out by the fact that during the first year's operations the revenue amounted t0: £1536 per week, whilst.' the second year .: provided only £ 831' per week." • - • . ; It- has to be pointed out that during the first season the ; Park was open for.only sixteen weeks, whilst during the second season it was kept open for the equivalent .of twenty- five weeks.. "Fiat Lux" wonders whether every week of the twenty-five was profitable. It is evident that n the directors appreciate the point n that , to' maintain patronage, fresh novelties must constantly be added; for the 1928-1929, season, the Park.has been greatly improved by the. addition of various devices, principally the river caves. Altogether, over. £8000 has been spent m additions, whilst considerable sums have also ; been expended on rearranging the lay-out and improving the existing plant. ■... .. The 'nominal capital of the company is £40,000, divided m £1 shares of which 8000 are 10 per cent, preferreds and 32,000 are ordinaries. . i . Preference shares to the extent of £7654 have /been subscribed' and fully paid-up, whilst £28,000 of ordinaries have been placed and are also fully paid. The present balance-sheet shows that no alterations have been effected In , the capital, £35,654, the. amount

paid up. being the same as at the end of the previous year. ! The reserve for taxes, at £878, is ' £ 622 less than previously. It is not clear, whether . this ; provision is to coyer (income-tax to the v eh4 of the period juh'der review, but i.V^s qtiite likely that ;such may, be th"c case. '■■ Creditors at £1334 have jumped up 'by £1212, but this total should not icause any concern since the company had £4500 out at short cajl. Xast year, : after payment of the ordinary dividend ; andf; 10 <per cent, on pVeferreds, there remained m the profit and loss account a credit of £938, but thisv'ihas now disappeared and xn 'its ,place;thereyis. a;;d~ebitrbf £ 776, to be wiped' ofut-by future profits. During the period under review, no less than £5784 has been added to the buildings, plant • an.d machinery account, which • now : stands at a total ' of ;£ 29,885; m addition, it has. to be remembered that . approximately £ 5000 'has been written off for depreciation. It would appear vthat the rate of depreciation, which last year was 12% per cent., has how ' been i aised to 20 p§r cent.; whilst this is a much closer approximation, ---tHis writer, prmly believes that' -25' per cent. Is the very lowest" rate which < could properly be applied. ' ' .'- --: Office- f urrilturjs. and ifitiinga have disappeared frptn 'this^.year's a'o* ' 'counts ahd have presumably' been ' included under the heading of ; plant.'- ■*■ ' : ■■;•'■■■'• . ; ; ." '' v ' \. : . Prepaid /expenditure is quite a large aniount'at £486 and is £298 ahead of last y«ar. '■■..■■'.'.' ; .Flotation' expenses remain at £2120, an amount of approximately £700 having been written off for each of the two year's. It ia ; to be regretted that a much'heavier write-off was not effected out -of •the^flriat 'yearns substantial profits,: a¥' the' ltem -1s now going to be a .handicap- for. iyeafsrto come. Gaiahion deposit: and: tm current account, £2453; is £8536 less than la&t year, but £2046 of the amount was m war bonds and forms a very readily realizable security m cbae of need. Of the cash on deposit and on.cvr r rent "account, £22 # 50 is with the Auckland-: Gas. Company; and .will have to be called up to nieet the preferred dividend and income-tax claims. i The cash at bank on current account amounted to £188 and an imprint of £15 completed this item; As was stressed, m this'- writer's review, this company is engaged m a highly speculative; venture and must therefore expect varyinlg returns from ; year. . to : . ■. "; • '■£. Unless substantial Preserves are oreated for the equalization of dividends, shareholders will be compelled to enjoy a harvest" oiie: year and suffer a .faminerthe next. "Fiat IiUX" believes the business can be run to regularly produce a net return for shareholders, but the financial policy of the first year must be. scrapped entirely and a much more conservative\course adopted. The shares are at present quoted at about 4/- each' and as a speculation should be worth consideration. '^\