COMPANY PROGRESS

Otago Witness, Issue 4032, 23 June 1931, Page 61

COMPANY PROGRESS

GORDON & GOTCH (AUSTRALASIA), LTD. Paid-up Capital, £600,000.

The shrinkage in the half-yearly net profit continues, but is not as great as those for the previous two periods. No further cut has been considered necessary in the dividend on the ordinary shares, the rate of which remains at 8 per cent. When the distribution to both preference and ordinary shareholders is made, there is a balance of £3892 to add to reserves. In the allocation of the net nrofit the proportions of the net surplus have been allocated as follows: — Net DisProflt. Retained, triliuted.

The latest division emphasises how, as the profits diminish, the distribution proportionally increases. Nevertheless, reserves are steadily rising, as their latest aggregate of £261,445 shows. General reserve remains at £211.094, and contingency reserve at £31,000. The increase at this time is attributable to the customary increment to leasehold reserve, bringing it up to £2153, and to the larger floating balance. The dimensions of taxation reserve. at £17,740, would seem to indicate that something over and above taxation demands is contained within it. and might appropriately be added to general re serves. In considering the matter of reserves. the appearance of goodwill amounting to £118,074 on the other side of the balance sheet has to be taken into account.

Expenditure is being strictly curtailed, the reduction on this occasion being sufficient to mitigate considerably the fall in the gross profit. As no particulars are given regarding the individual amounts of the various expenses detailed, which cover both disbursements and the allowance for depreciation, the items chiefly responsible for the reduction cannot be traced. A comparison of expenditure with gross profit for the latest four periods comes out as under: —

Expenditure Tax- Trading General ation Total Balance Ratio £ £ £ £ p.c. Sep. 30. 1920 .. 21.751 12.304 3t.H5 87.070 39.1 S Mar. 31, 1930 .. 21,233 7.630 28,874 70.553 40.93 Sep. 30. 1930 .. 21,330 8,317 29.053 02.415 47.51 Mar. 31. 1931 .. 17.955 7.181 25.100 53,058 47.43 Although the figures for the past halfyear are smaller, there has been no material change in the respective positions. The chief feature among the liabilities is the large reduction in the bank overdraft, which has fallen from £123X120 to £7170. The reduction has not occurred at the expense of other indebtedness, as the sundries group has dropped from £115.687 to £95,199. This group is divided among sundry creditors, subscriptions paid in advance, and bills payable, but it does not appear how far the preponderating unit of sundry creditors (£90,497) is subject to interest. The mortgage on buildings remains at £6429, making the total indebtedness to outsiders £108,797. Six months previously the total was £249,152. The saving in the interest bill in consequence must be something appreciable. There is little difference to record in the fixed assets. Freehold property, at £207,767, is practically unaltered, while leasehold property at £23.584 is following its course of being periodically reduced in small instalments. No provision for depreciation has been made in respect of the freehold property, the full wastage allowance having been applied to plant, fixtures, and fittings. At £44.054, they are less by £2844, a reduction which is doubtless entirely due to the depreciation allowance, but it is not disclosed how far that reduction represents the ful] allowance. The nature of the plant may vary considerably, entailing a diversity ‘in the rates of the provision.

Among the liquid assets, the foremost place is held by the sundry debtors and stock groups. The former, including bills receivable, is entered at £300,721 after provision has been made for all bad and doubtful debts. It is reduced by some £55.000, but it seems fair to assume that realisation has been taking place on an extensive scale, both in sundry debtors and in stock. The stock group is down to £233,526. or by over £40.000, and it would appear that the reduction in the bank overdraft may be partly attributed to the contraction in the two main liquid assets. By falling to £44,405, payments in advance nave followed the same course, and would lend useful aid towards diminishing the indebtedness. Another result is that it has been made possible to add appreciably to general investments, which now stand at £18,259, while reserve fund investments remain at £19,700. The position looks further strengthened by the general pruning down, and perhaps would impress the observer still more favourably ; if the asset of goodwill was expunged from the balance sheet.

When the gross profit of the past financial year is compared with that of the preceding year, the decrease is just over £4ooo—a difference which, when the magnitude of the figures involved is considered, is insignificant. As the gross profit is not shown until certain provisions and allowances are made, and those under existing conditions are not likely to be smaller than usual, it may be assumed that the revenue of the bank is little, if at all. diminished. The hand of the taxgatherer has. however, lain heavily upon the past season's results, an increase of nearly £87,000 being recorded under rates and taxes alone. When to that additional expenditure is added the normal increase in general charges associated with the development of the bank, the net surplus comes out at £845.814, or approximately £103,000 under that for 1929-30.

The net return is equivalent to 13.27 per cent, on the paid-up capital, while the return for the prior year was 14.99 per cent. The proposed allocation of the profit involves the same amount for distribution as that of a year ago, but in this instance shareholders will receive almost 97 per cent., leaving under 31 per cent, to swell reserves. The rates ”of dividend, including bonus, in all classes of shares are unaltered.

On this occasion reserve fund receives its smallest increment for several years. The direct transfer of £25,000 looks almost negligible when compared with the transfers of recent years. It is a time such as the present that reaps the benefit of the extensive provisions made in the past, which have rendered it possible to maintain the distribution on the former level notwithstanding the shrinkage in the net result. Reserve fund will be brought up to £3.575,000 and general reserves to £4,201,002, after the allocation is made. As the paid-up capital has not been affected during the past 12 months, reserves have slightly improved their relation to it. The annual comparison is as follows:—

The reserve held against taxes remains at £426,000. If a withdrawal from that account is justifiable, the past year, when rates and taxes have made so large an increase, would appear to have been the occasion. The fact that reserve for taxes remains intact indicates that such a demand was deemed unnecessary, and reserves are the stronger in consequence. Among the liabilities, the miscellaneous group has fallen to £4,331,328. The assumption is that bills payable are responsible for the drop of over £500,000, as the tendency of provisions to meet contingencies would probably be to rise. As there are doubtless other units in the group, it is impossible to tell all the causes contributing to the general effect. The longterm mortgage debenture stock has advanced to £607,050, the market having evidently been considered favourable towards increasing the issue, while incidentally the demand for that stock has been demonstrated. As the long-term mortgage capital plus the debenture stock exceeds the loans in that department, a balance of £42,366 appears as a liability for. the unemployed portion. Notes in circulation are a fluctuating item. They stand at £3.679,957, or. under their figure at the bank’s 'closing date for several years. The contraction in the amount outstanding in notes is possibly a sign of the times, and a movement that may be accentuated as time goes on. A comparison of notes with the coin group comes out thus:—

The coin group has reverted to something like its previous aggregate, which gives it a marked preponderance over the' notes in circulation.

As the chief liability, deposits show a drop of over £1,500,000. Concurrently, advances have fallen some £130,000, after their excessive rise during 1929-30. The increasing demand for accommodation by customers has thus stopped and has been replaced by a. slight reduction, but the sum released in that manner falls some £1,450,000 short of the amount required to meet deposits uplifted. Consequently there has been a further demand upon the liquid funds to that extent, while advances in their ratio to deposits are larger than at any closing date in recent years. The relations between the two have been as follow:—

The positions now ruling are similar to those of 1920-21 and 1921-22. The volume of money concerned is rather smaller now than it was 10 years ago, while the shareholders’ funds in the interval have increased over 80 per cent. The reduction of the margin to a greater extent than formerly is thus well counter-balanced by the greater security behind it-It is noticeable that during tbe post-war period, the increase has been almost entirely on the side of the advances, the movement on the part of the deposits having been comparatively small. The revenue will have derived the benefit of the larger sum lent out on interest.

New Zealand Government securities are the section of investments that shows the greatest difference. They have been reduced to £3,467,262,’ or by some £540,000. Apparently chosen to meet part of the drain arising through the withdrawal of deposits, the realisation of New Zealand Government securities has seemingly been regarded as attended with more advantage than the sale of other securities. Australian Government securities have increased to £3,548,443 in spite of the possibility of their market value having been adversely affected during the past year. Municipal and other local bodies’ investments have fallen some £75,000, but money at call and short notice and London securities have decreased only about £45,000. The greatest alteration is seen in bills receivable, in which nearly £BOO,OOO has been released, while from bills discounted almost £600,000 has been made available. It can be said that comparatively little change has occurred in the liquid’ assets, and that such as has happened has not affected their relation to outside indebtedness to any appreciable extent. The fixed assets group has followed its usual course by rising to £600,759. No direct transfer from the surplus has been applied towards the reduction of premises for some time. Evidently that method of adding to reserves has been discarded as unnecessary. Although capital expenditure of over £20,000 has taken place, it is not improbable that the margin between the book value and the market value is greater than it was at the beginning of the year.- YVhen the large amount of property that Is held in New Zealand by the bank is considered, it is seen how great is the extent of land and buildings of which the institution is the proprietor, and how widely-spread the districts are in which it is interested. In the great majority of cases the value must be steadily appreciating. The total sum allotted for dividend is £817,969. Out of that amount the New Zealand Government receives £245,312, and it may be assumed that the greater pai’t of the balance is held in New Zealand. The effect of releasing such a volume of money throughout the Dominion within 12 months must be felt throughout the whole land, and the reduction of the rate of distribution on the ordinary shares alone by 1 per cent, would react prejudicially upon the purchasing power not only of shareholders, but of tbe general community. The position of the Bank of New Zealand and the weighty influence it exercises in the country of its origin must surely be unique among banks. When the prosperity of the bank and the Dominion are bound so indissolubly, it is reassuring to find that, thanks to the wise and steadfast policy in the past, the financial depression has not so far been able to check tbe measure of the distribution meted to its proprietors.

# Reserves £ Trading Balance £ Net Profit £ tDividend Pref. Ord. p.c. p.c. Sep. 30. 1027 .. 168.306 75.019 41.947 8 10 Mar. 31. 1023 .. 187.535 80,873 47,973 8 10 Sep. 30. 1228 .. 290.283 78,167 46.889 8 12 Max. 31. 1029 .. 217.3S0 83.937 51.575 8 12 Sep. 30. 1929 .. 235.542 87.070 52.955 8 12 Mar. 31. 1930 .. 248.316 70.553 41.678 8 10 Sep. 30, 1930 .. 257.336 62.415 32.762 8 8 Mar. 31. 1931 .. 261.445 53.053 27.892 8 8 • Excluding taxation reserve. j Rate per annum

£ P.O. p.c. Mar. 31. 1925 46,234 5..74 43.26 Sep. 30. 1925 38,229 47.68 52.32 Mar. 31. 1923 39,261 49.06 50.94 Sep. 30. 1920 39.422 39.12 60.88 Mar. 31. 1927 38,580 24.83 75.17 Sep. 30. 1927 41,947 30.87 69.13 Mar. 31. 1928 47.973 39.55 60.45 Sep. 30. 192S 46,889 27.49 72 51 Mar. 31. 1929 51.575 34.08 65 92 Sep. 30. 1929 52.955 35.80 64.20 Mai-. 31. 1930 41,678 30.42 69.58 Sep. 39. 1930 32.762 26 74 7*! Mar. 31, 1931 27,892 13.95 80.05

BANK OF NEW ZEALAND Gross •Net Dividend. March 31 Profit. Profit. Pref. Ord A. B. £ P.O. p.c. p.c1918 .. 1.190.441 336.606 10 15 15 1919 .. 1.217,133 388,021 10 15 15 1920 .. 1.376,838 419', 04 5 10 15 15 1921 .. 1.84 t'aiT 777.255 10 10 13 1-3 1922 .. 632,042 10 Iff 13 1-3 1923 .. 1.540,041 553.639 10 10 13 1-3 1924 .. 1.709,288 735,831 10 10 13 1-3 1925 .. 1.775.323 819.286 10 11% 13 1-3 1926 .. 1,888.309 912. ICO 10 11.8 13 1-3 3927 .. 1-830.881 847.671 10 13.2 14 1-3 1928 .. 1.316.859 841.878 10 13.2 14 1-3 1929 .. 1.91'!.6<;0 912.954 10 13.2 14 1-3 1930 .. 2.013.526 948.534 10 13.2 14 1-3 1931 .. 2.009.412 845.814 10 13.2 14 1-3 * After deductins interest on guaranteed stock. 4 per cent, each year.

General Paid-up March 31 Reserves. Capital. Ratio. £ £ P.c. 1018 2.345,702 2 279.988 102. S3 1919 2,490.224 2,279.988 109.4S 1920 2.646.520 2,627,441 100.72 1921 1.886.275 3.904,988 4S.30 1922 2.105,818 3,904,988 53.92 1923 2.246.957 3,904,988 57.94 1924 2.831,514 5.029,988 56.29 1925 3.088,299 5,029.988 G1.40 1920 3.390,378 G,254.988 55.08 1927 3,609,656 6.529,186 55.28 1928 3,732.525 6.771.198 55.12 1929 4.042,591 6,858,114 58.95 1930 4.173,157 G.S58.141 G0.S5 1931 . 4,201.002 6.858.144 61.26

Coin. Cash Balances. Deposits March 31 Notes. with Bankers. Ratio. e £ P.c. 1918 . 3,312,995 5,500.385 60.23 1919 . 3.728,429 5.918.455 62.99 1920 . 5,705.337 8,371,535 ’ 68.87 1921 . 4.741.492 5.925,791 80.01 1922 4,294,230 7,427.410 57.82 1923 . 4.564,G95 7,974,011 57.24 1924 4,072,101 7,196,347 56.59 1925 4,168.844 7.056,319 59.08 1926 4,444.392 7,291.795 60.95 1927 3,705,593 7.532.199 49.99 1928 3,797,080 7,527.420 50.44 .1929 4,290,793 7.142,140 60.08 1930 3,754.948 0,763,602 55.52 1931 3,679,957 7,106,498 51.78

March 31 •Advances, etc. Deposlta. Ratio. p.c. £ £ 1918 . 16.468,493 30,437.930 54.10 1919 . 17.389,787 31,716.353 54. 83 -1920 . 17.929,915 37.601,610 47.61 1921 . 27,725.874 34,475.655 80:42 1922 . 23.312,130 23,676,003 81.20 1923 . 17,740.718 30.003,926 59:14 1924 . 18,787.101 30,501,719 61.53 1925 . 19,329.186 30,079,282 64.26 1020 . 20.994,611 31,121.288 67.46 1927 . 22,462.952 29,604,024 75.72 1928 . 21.453.505 20.339,033 70.71 1929 . 33.939,651 63.36 1930 . 27,415.639 33.897.609 80.88 1931 . 27.287.253 32,324,685 84.42 • After deducting provision for bad and doubtful debts.