FINANCE AND BUSINESS. 



647 



GOLDSBROUGH, MORT & CO. LTD. 



The adverse conditions which pre- 

 vailed in the pastoral industry in the 

 earlier portion of the period materially 

 affected the ]irofits earned b\' this com- 

 ]'ian\- for the March, 191 3, }'ear. The 

 decline in the net earnings was almost 

 £^189,000, as compared with those of the 

 preceding- period. This is attributable 

 partly to the drought conditions, and 

 parth' to the fact that in the previous 

 two years the profits had been swelled 

 by the gains from station properties 

 sold. A repetition, therefore, of the 

 handsome profits earned in those years 

 could hardly have been expected. As 

 the directors state in their report that 

 none of the properties were realised 

 upon during the financial )-ear. it is evi- 

 dent that the declared profits of 

 ;^i 32,923 represent solely the year's trad- 

 ing result. A true comparison cannot, 

 therefore, be made with the former years 

 in which large gains resulted from the 

 sales of properties. 



* * * 



Nevertheless, a portion of the large 

 decline was due to a shrinkage in the 

 trading profits. So much is admitted 

 by the directors, when they state that 

 " the results of the drought are reflected 

 in the mcdified volume of business done 

 for the year." This statement is con- 

 firmed by a perusal of the comparison 

 of wool transactions for the two years. 

 In the 1 91 2 year, the total bales dealt 

 with were 155^194, as against 1 18,819 for 

 191 3, a decrease of 36,375 bales. The 

 directors, in their report, do not, how- 

 ever, give any idea as to what was the 

 actual effect of the drought upon the 

 profits. This is regrettable, for, in its 

 absence, the shareholders, as well as in- 

 tending investors, cannot gauge the im- 

 portance of the decline. However, the 

 fault lies more in the 191 2 report than 

 that of the year under review, for had 

 the profits from sales of properties then 

 been shown, distinct from trading 

 profits, a true comparison would now be 

 possible. 



The bearing this question has upon 

 the dividend rates, makes it of still 

 crreater importance. In 191 2 the rate of 



dividend j^aid was 20 per cent, per 

 annum, but this has now been reduced 

 to I 5 per cent, per annum, and upon the 

 basis of the past year's earnings it does 

 not appear reasonable to expect a higher 

 rate. Still the directors evidently do not 

 consider that year as a normal one, but 

 rather as one under the average. It 

 would appear also from the report that 

 they consider the outlook for the current 

 year is at present favourable, and that 

 they look forward to showing improved 

 results in their next report. The share- 

 holders, no doubt, will be pleased to see 

 this hope fulfilled. 



* * * 



The report contains no explanation 

 as to why the dividend rate was reduced 

 though at the meeting the chairman gave 

 as a reason, the advisability of making 

 provision against drought and other 

 causes of loss. The 15 per cent, divi- 

 dend rate declared absorbed over 

 £10^,000, leaving only about ;£"27,500 

 to be carried forward of the year's 

 profits. This, then, did not permit of a 

 dividend of 20 per cent, per annum 

 being paid. Certainly the board was 

 acting rightly in pa)-ing onl}' 1 5 per 

 cent., on the wise principle that the divi- 

 dend of any one year should be 

 governed by the profits of such year. 



* * « 



Still out of the 191 2 profits, ;6T 50,000 

 was added to the reserves, and the share- 

 holders were then told that the directors 

 deemed it advisable " in times of ab- 

 nomal prosperity so as to be able to 

 equalise dividends, to strengthen the re- 

 serve fund." Though not necessarily a 

 dividend equalisation reserve, the direc- 

 tors by making such an addition to the 

 reserve fund, apparenth- treated it as 

 such. Despite this fact, and after pay- 

 ing 20 per cent, for two successive years, 

 the rate is reduc^ed to 1 5 per cent., while, 

 with the appropriation of but ;6"3 5,000 

 of the reserve addition for the purpose 

 o'f equalisation of dividends, the direc- 

 tors would have been cnaL>led to pay the 

 higher rate of dividend. Moreover, out 

 of the profit and loss balance of over 

 ;{^70,6cK), it would have been easil)' jios- 

 sible to pa\- the extra 5 per cent. 



