Financial Reviews IN GOOD SHAPE

NZ Truth, Issue 1239, 29 August 1929, Page 9

Financial Reviews IN GOOD SHAPE

Wellington Woollen Company's Satisfactory Position SHARE VALUES SOUND « (By "Mat -Lux-")., y iiiiiiiiiiiimiiiiiiiiiiiiiiiiiiniiimMiiniimiiimiiiiiiiiniiiiiiiimiimiiiiunmii^ | During the past seven years the shareholders of the 1 J Wellington Woollen Manufacturing Company, Ltd., | 1 have received m dividends all the disclosed earnings § | except a modest £16,795, which has gone to swell re- | .-| serves. : -•'..- .- ..§. .' | The writer is convinced that the dividends have j | generally been higher than disclosed results warrant, | j and predicts a diminution of rate m the future and a | | consequent easing of the market price of these shares. | siHiiim.iiii.HimiHmimi.imiimHimiiiiiiiuimiHiiimmimu.imiH^ .„' IN the report which accompanies the equal to £40,000, was .'credited thereon accounts for the year ended June from , the 'reserve". 'account. •'*• 30 last, now .under review, and • since then the balance of £3 per' which was considered by share- share has been paid up in'casH. holders on August .19, 1929, the dlrec- y „-i - „.,■ . ; - .- ■ ■-• tors stated that the general depression . T h e liquid liabilities, of the firm- have that existed m the Dominion during «been : , substantially; reduced during the the year, and which had, unfortunately, ye *?£> -, ", • ' y, --. .V- • - ■''.-- not yet lifted, was reflected to some ex- T £® b *" k °If *****K ha f -J B ?"? £™2 tent m the figures, although not suffi- by,£18,242 and noV- stands at £38,458, ciently so as to prevent the directors »ut the dividend, payment will ,send from recommending the same rate of th^ up again, y , ;• ... - .y: dividend as last year— lo per cent. . Creditors on_ppen. account s how an „ , *. * • 4.T.- x- i * ..~ increase of £10,712, with a total of Embodied m. this article are two re- £7 4 ;499> . Comparing to-day's liabiliturns, and m the second one it is ties w ith those of 1923, the position shown that the disclosed net Profit for has improV e d . b y over.. £30,000. . the /ear was £ 30,545, whilst the diyi- Eyen > g £hJs . crm6 : maintains that ™* at 10 P + er a ? s + orbed £30 > 0()0 : the whole position could- be greatly ini£2ooo was transferred to reserve and proved by the kddition of a further £1020 was left to be carried forward. £50 ,000 of new cash capital. The fact is that the dividend Dealing with the assets, m the conabsorbs £30,000 out of disclosed Sensed accounts land . buildings ajid ■ " *.<-i/,««« oui v. uio^iuoc plant are. all included ln the one total profits of £30,545, so that of the 0 f £229,840, which shows a decrease £2000 transferred to reserve only on last year of £3905, due to the dif£s4s comes out of this year's ference between the additions made profits, the remaining £1655 being during the period and the £5000 pro-

pany is-, quite sound, this result o seven years' trading cannot be de scribed other flian as somewhat un satisfactory. / If the value of this concern were .t be judged solely upon' the consistent!; pessimistic annual report of its chair man, one could reasonably expect i to go Into liquidation at anytime,. bu on the other hand, considering th liberality of each year's dividend, com pared with the earnings, one is l f orcei to the conclusion that actually thi , company is doing much better thai its published accounts would lead on< to believe. The capital paid up . remains a £300,000, divided into 40,000 £5 ordinaries and 20,000 £5 preference shares. These preference shares are the rea kind of cumulative participate shares, and have such conditions at taching to them that .for all practica purposes they rank m security valiu much higher than either bank or insurance shares. In the first place these shares ar< entitled to a cumulative preferentia dividend at 6 per cent, per annum. If they do not get their dividend, or any portion of it is short paid m one year, such remains a first charge' on profits m thesucceeding year. On the other hand, whenever the ordinary shares get a dividend of ovei 6 per cent., the preference shares inusl also be included m the higher distribution. A further point of interest about these shares is that, m the event of a winding-up, they : are . entitled to a", return of their capital m full; in priority to the ordinary shares', y T'he holders of these shares have nc need to worry over the future of the local woollen -industry. The reserve of £67,000 shown on the condensed balance - sheet includes £56,000 of general reserve and £11,000 of fire insurance reserve. The former has been increased- by £2000, on the year and the. latter by £100. ' y . It is worthy of notice that m November, 1923, the company increased Its capital by 20,000 £5 shares, which were issued at par, while £2 per share,

f less than half of what one could reasonably expect. With the scientists of the world • each day producing some improved 0 method of processing artificial fibres y for clothing, there seems, to this critic, - to exist a grave danger of very valut able woollen manufacturing machinery t becoming obsolete almost overnight. c This factor should certainly be pro- - vided for out of current profits, but the 2 question remains unanswered In"the c case under review. ft. Taking a comprehensive view of the c affairs of this compkny, "Fiat Lux" cannot help feeling that its earnings t are m better shape* than its accounts . disclose, and so far as its balancesheet figures go, they show that - the 1 company, is m a strong financial posing tion. Z ■■ Therefore. its shares should continue 1 to be a sound investment, even though 3 the market price should recede slightly . from the present level, which this critic considers is higher than warranted: