SHAREHOLDERS REJOICE

NZ Truth, Issue 1192, 4 October 1928, Page 2

SHAREHOLDERS REJOICE

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Wellington Woollen Manufacturing Company, Limited

(By "Fiat Lux.")

Although the gross earnings of t Manufacturing Company, Limited, he sympathy with many other concerns, t 30, 19.28, is a record, being £3719 ii CONSEQUENTLY, the happy shareholders again received a 10 per cent, dividend, £2000 was placed to reserves and £2474 was carried forward to the 1929 accounts. An analysis of the published accounts discloses the interesting fact that these satisfactory "results were attained mainly through reductions m overhead expenses, which, compared with those for 1927, declined by no less than £6256, whilst — carrying the comparison back to 1923 — the reduction reached the huge amount of nearly £21,000. Regarding the gross earnings, these also have declined year by year since 1923. Comparing 1927 and 1928 figures, the latter are £1637 less, whilst comparing 1923 with 1928, the fall ls £17,867. Against this, however, is the outstanding fact that m the same period the expenses have been lessened by £21,000. ■ .' Undoubtedly woollen riianufacturing concerns have had some very difficult years lately. Local trade has been exceptionally slow and- the prices of wool have fluctuated tremendously. It isi this latter factor which is co difficult to foresee and difficult to meet

.when it does arise. Stability of prices is the keynote of prosperity and high prices for wool for one season, followed by low prices

the next, does not benefit, anyone financially. Iri a high-price year, woolgrowerß are jubilant and view the world through rose-colored spectacles. -Old liabilities disappear like mist before the rising sun, but others develop to take their place. Then comes the next season, with its fall m prices, and liabilities assume gigantic proportions. Forthwith a wail goes up that many woolgrowers will have to meet their creditors if prices do not improve. In other words, it is merely human nature to look upon the best , Bide of things— "Hope Bprings eternal m the human breast" — and it is very comforting to assure yourself that as the present season is such a good one, next year must be as good) if not better.

In such a commodity as wool, which enjoys a world-wide demand, it ls extremely difficult, even for those whose lives and capital are devoted to the trade, accurately to forecast prices from season to season. How much less chance, then, has a grower m New Zealand of anticipating prices? : Woollen manufacturers are, however, m a somewhat better position than the growers m the matter of passing on any increase m the cost of the raw material they use. A woolgrower has either to take the market

Jubilant Growers

the well-known Wellington Woollen aoe declined each year since 1 923 , m the net profit for the year ended June m adoance of 1927. offered that the 1928-1929 wool sales m New Zealand are going to show a slightly easier tendency m price. If this proves to be the case, then the New Zealand mills should be so much better off, since a variation of two or three pence per pound for unscoured wool is a difference which is too small to pass on to the finished goods. To enable investors to obtain a comprehensive survey of the results obtained by this concern during the past six years, there are published two returns, the first of which shows the gross profit, the expenses and the net profit for each year, and the respective totals for the period. The second return shows exactly how the disclosed net profit has been disposed of. It has to be observed that whilst the disclosed net profit for the six years amounts to £183,785, the amount disposed of by way of dividends and transfers to reserves, amounts to £185,5.36. This excess of distribution, amounting to £1751, has been taken out of the balance of undivided profits, which were brought forward from 1922 and

, gross profits, expenses' and net profits for period of six years: — • Year Gross profit Net Ending and Rents. Expenses. Profit. June 30 £ £ £ 1923 ..' 85,468 55,347 80.121 1924 .. 74,322 42,736 31,586 1925 .. 73,768 43,836 29,932 1926 .. 72,350 , 42,897 29,453 1927 .. 69,138 39,651 29,487 1928 ... 67,601 34,395 33,206

Totcils for 6 yrs. £442,647 £258,862 £183,785 Return showing annual net profits and disposal thereof for six-year period: . Year

Total for six years

£183,785 167,536 18,000 185,536 Balance from 1922, £4225; total £188,010. Balance forward to 1929, £2474; total £188,010. Dealing with the balance-sheet, it

amounted to £4225; consequently, the balance carried forward into 1929 has shrunk to £2474. Return showing

Note: * Indicates increase and t decrease compared with last year's figures.

price or hold his wool — and not very !many can afford to follow the latter course. He has no one upon whom he can unload his losses — he must bear them personally and hope for better things next year — but the woollen mills can raise the prices of their product within certain limits, m order to recover high prices paid for the raw material. ■ , The extent to which woollen manufacturing concerns can pass on the high prices . paid for raw material is governed largely by the prices charged for finished goods by competitive firms. In the matter of quality, the public is not as careless as certain retailers claim. Actually, Great Britain's supremacy m world-wide trade has been gained entirely through high-quality goods. It is nothing unusual to come across British machinery m odd corners of the world and find that it has been m daily use for upwards of forty years. . Even m New Zealand there are to be' found on the branch railways British-built loco- ■ : ■

motives which have been, giving real service for nearly -a quarter ot a century.

Reduced Expenses

'Thus we are en- ■• titled to ,claim that woollen companies can pass, on to 'the public the high . prices paid for wool within j certain limits, which are governed, chiefly by competitors. The one factor, however, which-, m these days of very fine margins i'jcbntributes most to the financial sucpess of a woollen company, is low working expenses. In the case- of the Wellington Woollen Manufacturing Company, Limited, there is no doubt that the masterly handling of this aspect of the business has done much to produce to-day's happy results. Let us make, a comparison between the 1923, figures and those for 1928. In 1928, the gross earnings were stated at £85,500 m round figures, whilst for that year the overhead expenses amounted to £55,400., This means that of every £100 of gross profit earned, £64 was spent in' earning it. > - Now take the results m 1928, when the gross profits were only £67,600. In that year the expenses fell to £34,400, so that each £100 of gross then cost the company only £51 to earn. Thus we find that over the short space of six years the company has reduced Its expense ratio to gross earnings by no less than 13 per cent., which is an excellent result, indeed, and one upon which, the management is to be congratulated. 1 Although this writer does not lay claim to any special knowledge of the world's wool markets, the opinion is

can be said that although the shareholders' interests have increased for the year by £6500, all but £600 of this has gone .m reduction of creditors, whilst the increase of £12,500 In the bank ovei-draft has been devoted to Increasing stocks m hand. That, briefly, is the result when comparing the 1927 and 1928 balance-sheets. Among the detail alterations, the first item to attract notice is the capital account, which consists of 40,000 £ 5 ordinary shares and 20,000 £5 preferreds.

In the 1927 accounts there was £5064 of capital not paid up, but during the year under review this has come m, making the whole capital of £300,000 fully" paid up. On the face of the present accounts, this concern requires at least a further £50,000 of working capital- and the present earnings are sufficient to . pay at least 9% per cent on £350,000. Reserves have increased by £2100 on the year; £2000 has been added to the general reserve from disclosed net profits a,nd £100 to the fire insurance reserve, but has

been charged against the year's working expenses. It is particularly pleasing to see the

employees' deposits accounts steadily rising year by year. The practical encouragement of thrift is a national service which brings its own reward m loyalty and better citizenship. The firm's bank overdraft has in-' creased by £12,535 and now stands at £56,700. This has not been done deliberately, but is due to the fact that owing to the general depression m trade, stocks could not be cleared and increased by £ 14,172 — and, of course, had to be paid for. "Flat Lux" believes that Internal trade m the Dominion will improve considerably during the next nine months. Compared with twelve months ago, our banking figures show wonderful improvement, but all sections of the community have of stern necessity cultivated the economy habit. The pendulum of public opinion ahd habit moves slowly but surely, and it ls now swinging towards more buoyant trading times.

Shares m the Wellington Woollen Manufacturing Company, Limited, appear to be a sound investment and at late market rates the return is equal to 7% per cent, on the investment.

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EndIng Net Re30th Profit Dividend serve Total June £ £ £ £ 1923 30,121 28,000 4,000 32,000 1924 31,586 28,096 4,000 32,096 1925 -29,932 25,658 4,000 29,658 1926 29,453 27,164 . 2,000 29,164 1927 29,487 28,704 2,000 30,704 1928 33,206 29,914 2,000 31,914

WELLINGTON WOOLLEN MANUFACTURING COMPANY^ LTD. * Condensed Comparative Balance-Sheet, June 30, 1928. LIABILITIES. ASSETS. Capital paid up 30Q.000 ♦5064 Land, buildings and Reserves 64,900 *2100 plant ;..... ...233,745 *512 Deposits ag-ainst calls ■— f2347 Stocks ..........216,154*14,172 Profit and loss; .17,475 *1752 Debtors 55,294 f1266 Unexpired insurances 396 *27 Shareholders' funds 382,375 *6569 Cash . .i; 355 ♦152 Creditors ........ 63,787 f5912 Employees' deposits 2966 O/S dividends 116 - *29 Bank; „-.,.56,700^*12,535 * £505,944 *13,597 £505,944 *13,597