NEWTON KING, LTD.

Taranaki Daily News, 5 August 1921, Page 6

NEWTON KING, LTD.

FIRST ANNUAL MEETING-

PRIMARY PRODUCTS MARKET.

CHAIRMAN REVIEWS POSITION.

The first annual general meeting of' shareholders of Newton King, Ltd., waa held in the Soldiers’ Club, New Plymouth, yesterday. Mr. Newton King (chairman of directors) presided. On the suggestion of the chairman, the report and balance-sheet, which had circulated, were taken as read. lu reviewing the work of the year just concluded and the present position of the company, Mr. King said: “In laying before you our first report and balance-sheet, it is to be regretted that no dividend on the ordinary shares can be declared. No doubt most of you are conversant with the causes that have rendered this impossible, but for the information of those who have not had the opportunity of studying the matter, it is essential that at this stage I should give all the information possible to shareholders. When the company came into being in August last by purchasing in toto the business that had been carried on so successfully by me for over 40 years, everything looked bright and prosperous. We were, as has now been proved, at the height of a trade boom, money was plentiful, business in all departments was exceptionally good, and indeed continued so ior «ome time afterwards.

“It was thought that the great war being at an end there would be an unlimited demand for our primary products. It was felt that both butter and cheese were certain to reach figures never dreamt of before. At that time cheese contracts were made for the season at up to Is 2sd per lb. f.0.b., and even at this exceedingly tempting price most of our factories, at any rate the large ones, refused to sell, no doubt thinking they would do better if they consigned. Butter was not free of Government control, hut the price obtain able it was known would be a record one, and the subsequent sale to the Imperial Government at 280 s f.o.b. confirmed this. FROZEN MEAT AND WOOL. "The prospects for frozen meat were good, many thinking that when things I settled down there would be an unlim- ! ited demand from the Continent, and a few months later there were many buyers from the Old Country at very satisfactory prices. Unfortunately, owing | to industrial trouble, the works were a I month later than usual in starting, and | in consequence the quantity shipped under sale contract was limited. From the foregoing you will gather that in the first few months of this company’s : existence we all felt that, for some tfme ; at any rate, wo wyro assured nf good |> markets for our produce. The only blot was wool. The prices obtained for the crossbred wool from this district were very low indeed, and although it was recognised that it would affect many of our clients in the interior, it was not thought it xyould affect us so seriously as it has done. “The of the meat market j came with dramatic suddenness; there j were no premonitory symptoms. The ; first intimation was received by cable from London late in February when we were advised that no sales could be made. The effect was felt instantly, a.s more farmers than usual had fat stock on hand that would have been in the works had killing commenced in December. as usual. Cattle and sheep became I a drug in the market, and were not ! saleable at half the money they had J made a month before. This collapse in i meat, following wool, made people realI fse the seriousness of the position. Had j the price of meat kept up, the loss to | this district would not have had any | serious results. FINANCIAL TIGHTNESS. “The banks by this time were feeling I the pressure caused partly by the reduc- • ed exports owing to the strike, and ’ largely by the rush of importations I from England and the United Stites. I Goods which had during the war time been unprocurable, were rushed forward. I and orders in many cases were duplij rated, and triplicated, and the soldiers’ • loan and .neomc tax absorbed very I large amounts. The natural result of ! the banks’ tightness was immediately felt by our farmers, and it is now generally recognised that we are passing through a period that will tax the business men of this Dominion. In confirmation of this you have only to reflect I on how serious the matter of finance I must have been when the Government J found it necessary in March last to pass , th£ Bill extending the moratorium to | deposits held by mercantile houses. • building societies, and companies of a like nature. This moratorium is in force up to December 31. but from some re- ‘ marks recently made by Sir Francis ■ Bel], it appears probable that the period will have to be extended, although probably in a modified form. “The financial tightness came at a most inopportune time for this company. Farmers, being unable to sell their surnlus cattle and sheep, were not in a position to make the reductions tn their accounts which we generally expect and rely upon during the summer months. In addition to this many of the dairy companies were obliged to hold large quantities of their produce in store, for want of steamers to carry it, and consequently were compelled to restrict the amount of their pay-out to a much lower margin than would otherwise h,ave been the case, and it will be well on to the end of the year before many of the companies will be in a position to -know the price realised for the year’s output, and to pay out their bonuses, which under normal circumstances is usually done in July or August. This does not apply to the factories which made butter only, or to those cheese factories which sold, whose meetings are now being held and their bonuses being paid. BURDEN OF TAXATION. “There is another matter that I must refer to. and that is the excessive taxation companies are laboring under. During the war the income tax was raised from Is 4d in the £ in 1014, to 7s 6d in 1920. This was thought to be a war measure, and we were led to believe that when peace was restored this tax' would be considerably reduced, but to our surprise the Government last session increased the rate to 8s 9d 3-sths in the £. It must be borne in mind that the actual rate is nearer 10s in the £, as **»ere X.® charges usually deduct-

ed from earnings that the Income Tax Department cannot allow, and the depreciation allowed by the department is quite insufficient. “We are quite aware the Government is up against it, and must get the money from some source, but the injustice is in making the shareholders, one and all, pay the maximum rate if a company earns the maximum amount. The effect of the present Act is that a holder of shares in any large company has to pay, say, 10s in the £, although he may not be liable for any tax whatever if his money were invested in other ways. In England and the other Dominions the shareholder applies to the State, and if not liable to tax, the amount levied is returned to him. This is in accordance with the principle of the income tax, viz., that each should pay in accordance with his income, hence the graduated tax. In Victoria they have two income taxes, the State and the Federal; Is and up to 2s 6d, the latter being refunded if the shareholder is not liable.

“This grave question was very fully discussed at a very large meeting of financial companies held recently in Wellington, and representations were made to the Premier, who will, we 'believe, modify the taxation as it now applies to companies. It is not only the shareholder who is badly hit by this tax, but it is having a serious effect on our farmers, as the auctioneers from Auckland to Wellington have found it necessary to make large increases in their charges for commissions and interest, in order, if possible, to pay their shareholders a reasonable rate of interest on their investment. MERCHANDISE BUSINESS. “Turning to our merchandise department, we have, in common with other mercantile houses throughout the Dominion, been passing through a most trying and anxious time, and although the losses made on our stocks have been fairly heavy, we have, compared with many other firms, escaped lightly. Owing to the financial stringency already mentioned, many importers were obliged to quit their goods at far below landed cost, the consequence being that firms like ourselves were obliged to either meet the market, or to hold our stocks until these cheap goods were exhausted, but as the markets the world Aver were falling, this was a somewhat dangerous policy. The position has caused your directors much uneasiness, but we trust the worst is now over, and that in this direction things are becoming more normal. COMPANY’S FINANCES. “I will now refer briefly to the bal-ance-sheet. You will that the subscribed capital 'amounts to £375,105, of which £370,399 3s has been paid up, there being at April 30 lost £4765 17s calls in arrears. It will bcj seen that sundry debtors, which includes all secured and unsecured accounts, stand at ls 7d, and bills receivable £60j24-1 15s Bd. These are spread over

many thousands of accounts; to be added to this item is the contingent liability on bills discounted, £76,578 os lid. These accounts have been examined very closely. This was necessary owing to the guarantee of the vendor. The directors have set aside a number of accounts not paid for, on which the vendor has extended his guarantee for a further period of twelve months. Your directors have made provisions for bad debts that have come into existence since the formation of the company. In order to protect their debtors as far as possible, your directors made an arrangement with the vendor to allow a large proportion of the cash payment to him to remain in the business; without his assistance it would have been necessary to make heavy demands on our debtors, and wo feel certain our shareholders will agree with us that during this crisis such a course was inadvisable. The company’s interests are so intimately connected with the farming interests that every possible means should be adopted to help them, and by so doing to enable them to increase their production, which is so necessary for the Dominion; but the farmers must recognise that while we are willing to assist them as much as we possibly can, they, on their part, must do their share by reducing their indebtedness by every means in their power.

“The stocks on hand as set down amount to £134,869 7s 2d. This value is not taken at cost, but at considerably reduced prices, and we feel satisfied that the result of realisation will be quite satisfactory. The volume of business, as indicated by the bank’s figures, we are pleased to report, shows a very marked advance on the average turnover of the five years previous given in the prospectus, the excess for the year being over £600,000. The purchase of the old drill hall, which is opposite our future offices, and almost adjacent to our warehouse and motor garage at'Kauwau Pah, was an excellent investment, and will give us all the storage required at a minimum cost. The sum of £4424 has been set aside for income tax, and £5607 9s 9d for dividend on preference shares. This latter amount has recently been paid. “It is with regret we have to state thaX the slump in the live stock market has made it necessary to dispense with several valued officers taken over with the business, and it has been deemed advisable to take several of our motor cars off the road. Reduced commissions have, forced us to cut down our expenditure, and it may be necessary to still further reduce men and cars. FUTURE OUTLOOK BRIGHT. “Touching on prospects for the present year, we are pleased to state that tfie dairy industry promises to be very remunerative to the farmers, indeed, the future looks very much brighter than it did a month or so ago. The market for store stock is better than it was, but it is still very low. Sheep, owing to the impossibility of selling the wool, will probably not advance materially, although fat lambs promise to be in demand next season. It is not so much that the prices for meat are row in England, but that the charges for freight and expenses amount to nearly three times those charged before the war, and how these charges are to be reduced is a serious problem. The steamers cannot reduce freight much so long as they are full only one way, and many steamers have recently arrived from England in ballast, to take meat cargoes Home.

‘Wool is an unknown quantity so •far as prices are concerned, and although at the present time our wools are scarcely worth shipping, an advance may come more quickly than many anticipate, but with very little reliable data to go on it is impossible to make a forecast, but an appreciable rise in wool would make a marvellous change in the finances of the Dominion, and materially help our clients Uk the

land in the interior. It will probably be some time before the iinancial stringency is over, and it behoves everyone to study economy, a thing that has been well nigh forgotten during the war period, when people earned big wages and for the most part spent Tight royally.

“Before closing my remarks I wish to express my appreciation of the valued services rendered by the staff during the past year. The work has been most strenuous, and the result in these troublous times reflects the greatest credit on them.” Mr. King then proposed the adoption of the report and balancesheet.

Mr. S. W. Shaw seconded the adoption of the report and balance-sheet, and in doing so referred to the regret of the directors that it had not been possible to pay a dividend on the ordinary shares of the company, at the same time pointing oat that the balancesheet compared favorably with the majority of similar companies doing business in the Dominion. He also state<l that the shareholders were fortunate in having a man of Mr. King’s ability and experience at the head of affairs during the critical period through which they were passing. THE DISCUSSION. On discussion being invited, Mr. C. T. Rundle referred to the amount of calls in arrear as shown on the balancesheet, and asked if it was not possible to get the arrears on calls paid. In reply the chairman stated that a portion of these arrears had since been paid, and that it must be remembered that the arrears only amounted to something over £4OOO. He considered that in a company with a called-up capital of £375,000 this was a very small amount, especially when it was. borne in mind that the company had been in existence for only twelve, months. He also stated that some of the outside shareholders who were in arrear with their calls lived in less fav"ored districts than ours, being dependent upon wool and meat, and consequently had felt the financial pinch more severely.

Mr. S. Wyllie stated that apparently the company still owed Mr. King £93,502 17s lid on account of the purchase of the business. He understood the prospectus provided for payment of this at the rate of £20,000 per annum. The chairman replied that the amount payable to him in cash as part of the purchase price of the business had to be paid out of the new capital raised by the successful flotation of the company, and was in no sense a charge against the future income. The provision in the prospectus of a minimum payment of £20,000 per annum was only macle in case the shares offered were not ful ly subscribed. As a matter of fact, the board had authorised him to draw the balance due to him, but he had left it in the business as a convenience to the company.

The report and balance-sheet were adopted.

Mr. Wyllie then stated that he, in common with the other shareholders, was disappointed at the absence of a dividend, but he was quite sure that the company was fortunate in having such a man as Mr. King at the head.

Mr. King, at the close of the meetin, said: “I cannot let the occasion pass without expressing to the shareholders the most valuable assistance T have received from Mr. Shaw and co-directors. Their work had been done efficiently, and they had spared no time or trouble in endeavoring to meet the difficulties the situation presented in a period of abnormal uncertainty. T thought when the company was floated that I should be able to take life more easily and gradually hand the worries of business to younger men, but I had not calculated on the financial crisis and the attendant dangers.” The meeting then terminated with a hearty vote of thanks to the chairman and directors for their effort during the past year.