GAS, NOT HOT AIR

NZ Truth, Issue 1210, 7 February 1929, Page 2

GAS, NOT HOT AIR

inr* Try the Cuticura Shaving Stfck

Financial Reviews

Wellington Company's Successful Year

AN EXCELLENT RECORD

(By "Fiat Lux")

Following its usual practice, the Wellington Gas Company, Limited, has produced an excellent result for the year ended December 31, 1928, and reports installing a record number of cookers during the period, which augurs well for future dividends.

THIS writer has a most wholehearted admiration for the men who direct the destinies of the Dominion's gas concerns. The industry a short twenty years ago was almost entirely dependent upon street and private lighting as an outlet for its production of gas, but with the gradually rising popularity of electricity, these sources of revenue have disappeared. The Queen City, for instance, dispensed with the last of its street gas lamps some two years ago. Of course, the writing was on the wall years before the change actu-. , ally came into operation, and it is gratifying to know that those re- . sponsible for the management and welfare of the industry not only . ' read the warning, but, what is more to their credit, took heed thereof. I ■ Knowing, full well that .'the v loss of their entire lighting market was but a matter of time, they set to work m earnest to create new and better markets, and the eminently sound financial position of the majority of the Dominion's gas concerns to-day is a monument to the foresight, skill and enterprise of. those responsible for directing the industry during the past decade. In the case of the Wellington Gas Company, a most enterprising policy has been followed for many years past. A huge mileage of new mains has been laid to the most distant suburbs. Even Ngaio, Khahdallah and JohnsOn-

ville are now enjoying the company's slogan: "Cook by Gaß." Such reticulation has been very expensive, and although it was realized that it would probably be s~^ne years before the company could expect an adequate return upon its capital expenditure, it also realized that it could not get the business without first putting m its mains. Secondly, that any delay m meeting the situation might mean its entire exclusion from that market, since the big hydro -electric scheme was well under way, and if eletitric cookers, bath -heaters and radiators were once installed house-holders could not be expected to thrbw them out when gas was available. .>.■ The Gas Company management very wisely got m first, and its enterprise m so doing should be rewarded by the public to whom the service is available. For the year now under review, the net profit is shown at £57,630, this arising from the gas business purely, and it is £1951 behind the 1927 figures. The sales for the period amounted to £239,049, showing a di'op of £549. This Was due to the fact that the price of gas was reduced by 2d. per 100.0 feet on January 1, 1928, but the new business acquired during the year was not sufficient to offset this gift to consumers. The company's sales during the past four years have shown a very gratifying increase until this year, and this

notwithstanding substantial annual reductions m prices to consumers. It is fair to assume that with the recent additional suburban reticulations coming into heavier use future results should again show good increases. . Following are the figures covering . sales for the four years ended December 31, 1928:— Sales: 1925, £221,535; 1926, £224,148; 1927, £239,598; 1928, £239,049. ' During the same period the disclosed net profits from the gas business, "apart from, the income on investments were (net profits on sales only): 1926, £68,877; 1926, £64,887; 1927, £59,581; 1928, £57,630. In 1928 then, it can be seen that not only did the sales recede by £549, but owing to increases m the operating expenses of £ 1402 the final net, profit on sales went back £1951. \ Even so, the company managed topay its usual 5 per cent, dividend on preferred^ and 8 per cent., on ordinaries, and it still had over £12,000 of the year's net (including £3772 interest on investments) to sweeten up its reserves. ; These are now disclosed at the comforting total df £109,916, Including £22,616 of undivided- profits, which will toe carried forward m the profit and loss appropriation account. The present market price of the company's shares is about £1/10/6, including the half-year's dividend, due this month, and amounting to about Bd. per share, so the market assesses

tile value at slightly under 30/- per share. . Now, seeing that the regular dividend is 8 per cent, on the nominal value of £l per shai-e, the return on the market price is only a shade better than 5 per cent. Although m previous reviews this critic has seriously questioned whether this company is not with- ■ holding an unduly large amount of profit from shareholders, both secretly and openly, the potential investor m its shares has to con- . sider primarily the rate of return on the market price, and m this instance this appears too low to be attractive. Against this, of course, the optimistic investor will say that the company will m good time distribute bonus shares out of reserves and that that capital appreciation will more than offset the present low return on market price. supposing that m two years' time a distribution of one fully paid up share for every three now held is made, can the company then face the increased amount of dividend required, and at the same time continue t& rebuild its reserves? Perhaps it may be able to, but this critic's opinion is that if the company is now disclosing the bulk of its profits, then the market price of its shares is altogether too high. This is not intended to convey any idea of reflecting upon the company's financial position or present earning power — both are entirely beyond cavil, and

for people who hold the ordinary shares at a cost of even 25/- each, the investment is a sound and good one. But to pay 30/- per share oh present results and future prospects as they appear to this writer does not seem to be good business. Coming to the company's balancesheet, its nominal share capital is £560,000, divided into £1 shares. Of these 150,000 are 5 per cent, preferreds and 400,000 are ordinaries. In addition to the share capital, there is an authorised issue of £350,000 mortgage debenture stock, hence the total nominal capitalisation is £600,000. Of the nominal share capital, however, only £278,810 . ordinary and £84,560 preferreds have been issued and are all fully paid up, whilst of the mortgage debenture stock only* £200,000 worth has been placed upon the market. The position now is that share capital paid-up totals £363,370 and debenture funds £200,000, so that the company has very ample margins m all three directions to obtain additional capital should such be necessary m the future. » It should be pointed out that the above capitalization has remained unaltered since 1922 and the necessary funds to meet the expenditure on new plant mains, etc., during the past several years has been found out of the company's reserves, and even now

it has £21,000 m cash on deposit m addition to £48,805 invested m giltedged and quickly realizable securities, so .further capital issues are extremely unlikely. The disclosed reserves at the present time total £87,300, excluding both the individual balance of the pf oflt and loss account and what Is described as "taxation reserve £33,696." It is -highly probable that this acco.uht is 'very much m excess of requirements and if so, well, the shareholders are that much better off. The amount of depreciation written off during the year amounted .to £-21,666, an increase of £133 over 1927, but even so the buildings and plant, etc., advanced m value by £16,472, so that the company has spent on this Item during the year close oh £ 40,000. There is no doubt from these accounts that the company's shares are really worth holding, although it is considered ' that the returns do not justify the present -high market price. ■ „■-■■ ■■ " ■■ I

WELLINGTON GAS COMPANY, LIMITED. Condensed Comparative Balance- Sheet, December 31, 1928. LIABILITIES. ' ASSETS. Capital paid up 363,370 — Land, buildings and Reserves f . . . . 87,300 *18,000 plant 626,910 ♦16,472 Profit and loss 33,769 H796 Investments 48,805 t2OOO i \ '■ — Cash on deposit 21,004 *2004 Shareholders' funds 484,439 *13,204 Stocks 21,350 *1565 Mortgage debentures 200,000 ♦900 Debtors 30,943 *4"752 Consumers' deposits 1276 *37 Bank 3261 *770 Creditors 30,813 ♦8811 Unpaid dividends .... 149 fiO ... Taxation reserve 33,696 *661 Superannuation fund 2000 — £752,273 *23,603 £752,273 ♦^.EOS Note ♦Indicates increase and t decrease compared with the 1927 figures.

Here are the figures presented by the Company m support of its policy: — Miles of New Cookers Year. New Mains. Connections. Installed. 1925 .. .. .. 12 917 1,370 1926 9 1,092 1,825 1927 ..•■.. .. 23 1,397 2,215 1928 .. .. .. 22 1,756 2,577 Totals for four years .. 66 5,162 7,987