• GUY MOTORS LIMITED
Page 63
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With your permission, as both the 1945 and 1946 accounts are published together, I will deal with the earlier year first and subsequently draw your attention to matters which concern both years.
The only difference between the 1945 and the previous year's figures which require explanation is the large increase in the stock. This apparent increase was due to the fact that towards the close of the 1945 financial year we were completing contracts for military vehicles and Government payments on account of work in progress had largely ceased, so that we were then financing ourselves. Referring to the 1946 accounts, these show the effect of increased capital subscribed in October, 1945, and the increased reserve account by the premium obtained on the share issue less its cost. Another appreciable alteration will be seen in the items " Fixed Assets."
I should explain that if we were to adopt the latest practice in the arrangement of the accounts we could not present a proper picture in regard to the amount written off and reserves created thereby on buildings, plant and machinery, unless we obtained a valuation of these assets. Your Directors also felt this course was desirable because, as pointed out at our Annual Meeting in December, 1944, the figure at which these items stood in our books did not "in any respect adequately represent the extent of our organization," "the result of the heavy depreciation which had been written off over the years."
Since the war ended we have received many visits from customers who had not previously seen our works and we have also exchanged visits with all the important British heavy commercial vehicle manufacturers. In practically every case the visitors have expressed their astonishment at the size of the factory, the excellence of its layout, the quantity and
• quality of its modern equipment, and were surprised to find we manufactured practically every component for one model or another—petrol engines, gearboxes, front axles, back axles, frames, etc., which, in fact, has been our policy since the early days of the Company. To suit the varying demands for any particular model and balance production, we do from time to time sub-contract some of these units, but we always maintain a duplicate set of jigs and tools and a stock of material so that our own production can be recommenced at short notice. I stress these points because we have found there was a prevalent notion that we were only "assemblers" and no doubt the small value of the fixed assets in our previous balance sheets gave colour to this erroneous view.
The latest scheme of replacement of old plant by new was launched at the beginning of 1939 and much increased since the war ended, so that approximately 90 per cent, of our plant and machinery is of the most modern type. The valuation carried out by Messrs. Edwards, Son and Bigwood has been on a conservative basis, as a going concern. There has been no attempt or intention to inflate the value of the assets, and the difference between their figure and the value at which those assets stood in the books is shown as the depreciation reserve amounting to 1231,649, the net result being the same as if no change in the form of the Balance Sheet had been made.
It would be no exaggeration to say that no heavy commercial vehicle manufacturer has a higher percentage of modern plant and equipment than your Company and employing some 1,41)011,500 the Management is able to keep that personal touch which tends towards the greatest efficiency and harmonious working which is so necessary to-day.
You will also notice in the Balance Sheet the pro-vision for development of new models and reorganization of production, also for obsolescence and deferred repairs, totalling £33,500. I would point out that since the war we have spent far more money under these headings than the figures mentioned, nevertheless we propose to retain these reserves for the time being as further expenditure under these headings continues to be made.
The reduction in the amount of staff bonus was due to the elimination of A.R.P., N.F.S. and other special war-time personnel. The actual bonus paid to each individual was unchanged. The dividend paid on the ordinary stock was 15 per cent, for the tenth year in succession. The increased amount absorbed was due, of course, to the increase of capital.
It should be noted that as the accounts are now arranged the appropriations are shown in the Profit and Loss Account, and are also incorporated in the figures given in the Balance Sheet.
The 1946 year was a difficult one, and although we were able to change over from the manufacture of military vehicles to civilian types with surprising speed, we were soon confronted with shortage of supplies and delays in delivery, both of which increased in severity as the year rolled on. and for these reasons production fell short of the programme we had planned. Coupled with this, we regret to say we have not so far been successful in obtaining a settlement of our claims by the Government Departments to which I referred at our previous meeting, and, of course, no credit has been taken in the accounts for the amount involved. Through these causes the profit did not reach our pre-war standard, which explains the small amount we shall recover from previous Excess Profit payments referred to in the Profit and Loss Account.
Before leaving the accounts, I would point out that the current assets are more than double the current liabilities, and the reserve, at approximately £600,000, is over twice the amount of the issued capital, which you will agree discloses a very satisfactory position. I reported in December that the Company was well supplied with orders and, speaking generally, the output of both goods and passenger Vehicles has been sold for 1947, that many orders had been booked for both classes of vehicle for 1948, and I can now add others for delivery in 1949.
During the past year approximately 40 per cent, of our vehicles have been exported, and we are very gratified by the large percentage of repeat orders we continue to receive both from home and abroad, but we are much concerned with the ever-increasing difficulties of shipping.
Seven years of war has given some of the British heavy commercial vehicle manufacturers an exceptional opportunity of proving the quality of their products. During the war it was impossible to obtain new vehicles and the operators continued to run the old ones, but experience has shown that the mass-produced vehicle has a limited life, whereas the British vehicles continued to operate satisfactorily. There are to-day many hundreds of Guy vehicles at home and abroad that are giving satisfaction in spite of their fifteen to twenty years' life. This experience justifies your Company's policy of producing individually built vehicles for " long life and low running costs." Nevertheless, we must have regard to the present high cost of production if we are to be in a position to meet competition in the world's market when the present abnormal demands have been met—already I notice some American manufacturers have reduced their prices. • In common with other manufacturers, our main problems of to-day are supplies and production. We are told the shortage of man power is likely to continue for years and, in the circumstances, surely any source of labour supply should be accepted by all concerned, and the well-known restrictive practices limiting production eliminated.
The acute shortage of coal and electricity supply has its repercussions in every branch of industry. The effect on the life of this country is disastrous, especially at a time when we are struggling to establish and consolidate our markets abroad and, indeed, only in this way can we as a nation recover our financial position and improve the existing low standard of living. We are a manufacturing nation, we must export to exist.
For those engaged in industry I believe that increased fitness and efficiency should arise from the advent of the 44-hour 5-day week (when the supply of electricity allows us to work these hours). To make this stimulus effective, a ' greater incentive is required by reducing taxation and restrictions. The National appeal loses its pull after seven years of patriotic responses; many resent the reduction in their pay by taxationthis is only too evident by the slowing down of effort and absenteeism.
Your Board is not despondent of the future; your factory is efficient; there exists an excellent team spirit, and we believe that this Nation's common sense must again triumph. Industry • and commerce made this country great and can again restore its prosperity. But time is the essence of the problem, we must sink our political differences, "cut the cackle" and by a united effort get down to the job of supply
and production. SYDNEY S. GUY, Chairman. NOTE—This Report and Accounts were set up in type to be printed in time for circulation to the shareholders by the 17th February, as promised at the last meeting. As printing was commencing the National catastrophe was upon us and the use of electricity prohibited in this area. After some delay we have been able to find a firm of printers outside the restricted area to complete the work. In the crisis that has developed my concluding remarks apply with even greater force.