ON THE WAVE-CREST

NZ Truth, Issue 1204, 27 December 1928, Page 2

ON THE WAVE-CREST

EWRERER

IN discussing: the 1926 accounts of the company this writer expressed the opinion that the concern was then well round the financial corner. In reviewing • the accounts for the year ended ; September' 3o, 1927; the opinion was ''expressed that indications were m tlie direction of resumption of payment of dividend's for the 1928 year. Consequently, it was a very genuine pleasure indeed" to peruse the recentlycii'cuiated'report and accounts for the j year onded September 30, 1928, and to find the. payment of a 6 per cent, dividend for the period. The concrete evidence of the wonderful recovery this firm has made since the 1922 slump should put fresh heart into lagging shareholders and should serve as a valuable object lesson to all interested m farmer company finance. No doubt this dividend will strengthen the morale qf - shareholders to the point of promptly paying- up the calls which are due m February and May of 1929. The company urgently needs further working funds, but owing to adverse world's markets the directors, wisely, no doubt, re-- | framed from placing further burdens upon their shareholders. I Now that the tide of affairs has definitely turned, however, and the Dominion is riding fast on the crest of the financial wave, there <no longer exists any good reason for failing to call up capital. This writer's advice to the management is not only to call up capital, but also to soil additional shares wherever possible, as it is reasonably that the company will, during the next few years, have plenty of use for a great deal more capital than it now has available. In support of this contention *the. following, paragraph- -culled from- the 1 directors' . report is significant as indicating the satisfactory trend of affairs m the company: "The sales for the year (without including land sales) show the substantial " increase of £228,253." V '• The disclosed net profit for the year j under: review is '£10,818, which. is more

New Zealand Farmers' Co-operative Distributing Company, Ltd. BALANCE-SHEET UNDER REVIEW

- (By "Fiat Lux") % The New Zealand Farmers' Co-operative Distributing Ooms pany. Limited, is once again on the dividend-paying map after an absence of many years. It is an achievement of which the management and directorate have every reason to be very prsud.

than . double the 1927 returns which, totalled only £5005. *"v Then there has to be added. £1908 being the balance of undivided profits brought forward from last year, making an available balance of £1272 for distribution. Out of this sum a 6 per cent, dividend is to be paid, the report states, on "called up capital," but presumably this is intended to bg" on the paid-up capital and will absorb £ 519^4. A further £15 r OO is to be transf erred to the property depreciation, reserve, which will then stand at £3500; £1000 is to be added to the bad debts reserve, bringing it up to £5000 and £ 2000 is to be usod as the nucleus of a general reserve. This will leo.ve a balance of over £ 3000 of which it is estimated half will be required for income-tax and the remaining halt' will be carried forward to the 1929 accounts. 'To sum up the disposal of the year's profits very ■ briefly-, £5000 goes m dividends and £5000 to reserves. ■_'. If the company continues to work m these proportions a very few years should see it In a strong financial position, particularly If the directors will also earnestly prosecute the search for further Working Capital. Comparing the earnings for 1928 "with those fdf 1927, . the respective figures are £58,853 and £51,661, so that /the earnings for the year unclor review exceeded those'^for 192? by £7192. This additional . gross earning cost the company only £ 1881 extra expenses, the 1827 expenses amounting to £46,060, whilst the 1928. t0tal was £48,037. ; l When it is considered that the earnings In question were m*"*e largely m 1927 and early" 'in. 1928 (since the company's year ends m September) the Increase is particularly,gratifying. This lends the writer to express the Opinion that, provided the company is managed as capably m the future , it should have a. really brilliant record as a '"money-maker during the next several years. £ '»'• Adequate capital and careful and Wifl6. ( mattrtfjremeni are essentials \t this is to be achieved. The following analysis of this firm's yearly results from 192(5 should f>>'ove of m ( e>rest to readers showing unmistakably as it d<>e e ! that the innnfigement has not "run wild" on expenses as v result of petting back to a "substantial profit basis. .1925 1926 19,27 192$ - Gross £ £ ■ £ " £ earnings 55.712 50.706 51.661 58.853 . Expenses 50.637 48.066 46.6^6 4$ 0.3.7 ■ Net profit ■■: 5075 2«40 5005 10,816 Regular provision has been made m the annual accounts for depreciation

on plant, furniture and fittings and also for debts proved bad or doubtful during each scar. In 1927 an amount of £4000 was written off the properties account out of the write-down of paidup capital and of the £5005 net profit shown above £2000 was transferred to a "property depreciation reserve account" and £1000 was carried to a "bad debts reserve." The balance of the year's profit was carried forward after paying about £100 of income-tax. .In the 1928 accounts, prior to" arriving at the £10,816 of net profit, £2400 was provided for depreciation of plant, etc., and £2400 was written off for bad debts. The further reserves of £4500 are m addition to these provisions In the profit and loss account. Consequently, it can be realized that the 'management is pursuing a very conservative and wholly commendable, policy of consolidating' the company's financial position. "Fiat Lux" believes firmly that this is the right policy and one from which considerable benefits will accrue during 1 the next few years. Dealing with the balance-sheet, this .shows . the company to be m a much be;ter ]>ositiuiv than a year ago, the net decrease m outside liabilities being Weil over £6000. Taking 'the -items seriatim, the paidup capital which includes £0397 of calls paid up m advance now stands at £96,739, an improvement of £896. With the culls which are to be made m February and May of 192 D and various adjustments which are detailed m the report, this account should be. further improved m the 1929 accounts. The forfeited shares reserve- account has been increased during the year by £16, a very small amount in* deed, which can be accepted as a criterion of the return of shareholders' faith In their undertaking. The bad debts reserve at £4000 is I £ 1000 better off than last year, and with this year's transfer will amount to £6000. : 'This account has not been drawn upon eince it was created some years afro, each year's bad accounts having : been met from the profit and Ios» ac-

count. It is to be hoped that this happy state of affairs can be continued. '■'■/.■ ■ Mxecl deposits always remind this writer of ti.e tule of the tui'mer who was very keen upon doing things m. exactly the same way as his father hud done. ~ ( , One line day he went to town and stayed m an hotel which had coal gas lamps m the bedrooms. Father had always blown out the light before getting into bed, and he did likewise and awakened with a harp and a halo. Fixed deposits' were perhaps all right m palmy bygone days, when the coun-? try's prosperity arose internally. Tq-day, however, when commercial prosperity m the Dominion rests entirely upon the industrial situation m our distant overseas markets, a.' slump m cotton,' ateel or coal m England may overnight imperil these fixed deposits in'NeW Zealand. • The sooner Parllameht makes this class of business -Illegal, exempt to banking and semi- banking institutions, the better tor the investing public of New Zealand. , ■ !^ /'■ The item of accrued charges represents reserves for interest on : " calls paid m advance and rebates on eharteholders' purchases; Both these accounts will be closed, dither by payment or crediting to the individual shm'eholders' accounts against the calls now pending. ■•■'•■'■■■ ; Thus these items will disappear from the 1929 accounts. Creditors have increased on the year by £4784, and now amount to £24,631, Agoittflt this, thfe b« jik overdraft hftfl gone d6wn by £io,sßs,and now totals only £25,289.. *- ■ ; On the assets slide little alteration has taken place, the principal one being an increase of £2318 m book debts, which is . extraordinarily small considering the huge increase In the year's turnover. . ' i '■,■''' Taking a comprehehsive survey of the company's artairs, this critic feels that it hns come through a. motet difficult period with flying' colors. The writer commends to the shareholders, with absolute confidence the advisability o£ prpmptly SuDtJlyin* thA dlz-ectors with all the additional financial help possible. There is no longer reni^on to doubt that rising dividends will be the reward. \> ■' -T-V- ■■ ■ ■■-■■:■■ ' ' '■ ;