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TRANSPORT SERVICES, LIMITED

3rd April 1942, Page 12
3rd April 1942
Page 12
Page 13
Page 12, 3rd April 1942 — TRANSPORT SERVICES, LIMITED
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RECORD REVENUE-COMPANY'S GREAT NATIONAL EFFORT

Mr. H. C. DRAYTON'S SURVEY

rrkIE adjourned annual general meeting of Transport 1 Services, Ltd., was held on March 25 at Winchester House, E.C.

Mr. H. C. Drayton (the chairman) presided.

The Secretary (Mr. C. Johnson, F,C,I.S.) having read the notice convening the meeting and the report of the auditors, The Chairman said: Ladies and gentlemen,—The report and accounts having been in your hands for the usual time, we will take them as read. (Agreed.) The year under review--that is, to May 31, 1941—covered the period of air raids on this country, and I wish to pay tribute to the drivers, subsidiary managing directors and staffs and the head office organization for the magnificent way in which those men and women carried out their duties during that time. The shareholders should know and feel a debt of gratitude to those people.

The revenue for the year as shown amounts to £164,000 —a record for the company and one -upon which we can congratulate ourselves, the corresponding figure for the pre

viou9 year being £109,200. • Allocation of Profit After deducting war damage contribution there remains the sum of £157,300, From this, as you will see, there falls to be deducted our liability for E.P.T. and income tax, leaving for the shareholders and general purposes of the company £27,000. After paying the Preference dividend and transferring the requisite amount for redemption of Preference shares and payment of an Ordinary dividend for the year at 10 per cent., there remains an undivided profit on the year's working of £2,500. To this figure we add the sum of £7,300, being undistributed profits earned since acquisition. The reason for bringing this into the main parent company's accounts at this time is that we are rearranging and recapitalizing our subsidiary companies to make for smoother working and simplify our accountancy problems. I may add this will not make any difference whatsoever to either the balance-sheet figures or the consolidated balance-sheet. We also bring into profit and loss account the sum of £10,100 reserves against future replacements of vehicles. This sum had been placed to reserves in the past years and again is brought into the parent company's accounts to simplify our arrangements and reduce work and staff. There are also taxation reserves released, amounting to £13,500, making the total of £31,045. With the balance brought forward in the past year we arrive at a total of £50,450. The directors recommend out of this sum £2,000 be transferred to staff benevolent fund and £24,000 to general reserve, leaving balance to be carried forward of £24,400.

It has been in the directors' minds for some time that it will conduce to the happiness of the staff if they put into operation a pension scheme, but the Board have felt that it is impossible to do this in war-time. They therefore recommend that the sum mentioned of £2,000 be put to a benevolent fund, which can be used in happier days either as a basis for a pension fund or, if in the meantime there is a necessity, there will be the nucleus of a fund upon which to draw.

Transfer to Reserves The sum of £24,000 we are proposing to transfer to general reserve needs a little explanation. In normal times there falls to be replaced every year a regular number of vehicles, and when we sell an old vehicle we are allowed obsolescence—that is the difference between the figure at

which the vehicle stands in our books and the price we sell it for—as a deduction against the year's profits for income tax. Owing to the war we are not replacing all the vehicles we should. Consequently when we "do come to replace the vehicles there may fall as a debit against one year's profits the obsolescences arising from an abnormal replacement of vehicles. You will appreciate, of course, that each year

that becomes less owing to our yearly depreciation of vehicles. Nevertheless, it may arise and therefore part of this £24,000 must be looked upon as an insurance against excessive obsolescences arising in one year from this cause, and the Board, if that happens, and in their view it is wise to do so they will be prepared to use a• transfer from this general reserve to even out the profits of the company for that particular year. Before leaving the accounts, there is an item in the consolidated balance-sheet of goodwill of £202,800, as against £177,000 last year. The increase is due to businesses we acquired for the purposes of more efficient running of our organization. Certain people hold that goodwill in a balance-sheet should be eliminated as soon as possible. That belief can only be justified if a company is not earning profits that justify such an item. But leaving that aside, , in this company, if we had revalued our assets and fleet at May 31, 1941, they would more than have wiped out that goodwill item of £202,800. Our gross takings for the year under review have been expended as follows:—Wages, 30 per cent.; depreciation, 6 per cent.; running charges—that is, petrol, before taxation, and oil-27 per cent.; garage rents and office rents, etc., 12 per cent.; taxes—that is, petrol tax. H.P. tax, income tax and E.P.T.-21 per cent.; and balance for shareholders, 3 per cent. The balance of 3 per cent. is the amount left to the proprietors of the company, out of which they have to provide for finance for the future and dividends. I may add that the comparable figure last year left to the shareholders was 4.27 per cent.

Financing Increased Turnover To enable the company to show record profits has meant increased turnover, which again has entailed an additional sum of money to finance this increased turnover and is reflected by an increase in our stocks and debtors of £23,000 and £80,000 respectively. This increased turnover and profits mean that we have used our vehicles to their maximum capacity, in response to the appeal by the Minister of Transport to help move goods in the national interest. In normal times an increase of turnover such as I have indicated would have been financed by one of two methods: (1) An issue of capital; (2) savings ploughed back into the company out of our earnings. As regards (1), if we wish to increase our capital we have to apply to the Capital Issues Committee to enable us to do so and to prove that we are doing work of national importance.

E.P.T. Position As regards (2), with 100 per cent. excess profits tax there is nothing left over to the company to finance this increased turnover. I pointed out in my speech last year the serious disabilities of 100 per cent, excess profits tax, not from the point of view of any company in particular wisting to keep those profits, as such, but the difficulty—I might almost say embarrassment—of trying to finance an increased turnover from which only additional profits can arise. As you may be aware, the Chancellor of the Exchequer gave industry an alleviation of this 100 per cent. excess profits tax, and I cannot to better than read out to you the clause in the Finance Act of 1941 which deals with this matter:— " 28 —(1) After the termination of hostilities in the present war there shall be ascertained and recorded, as respects every person who has paid any excess profits tax for any of the periods in respect of which the tax is chargeable at the rate of a hundred per cent., the amount (if any) by which the total sum paid by him by way of excess profits tax and the national defence contribution (less any sum repaid or repayable on account of any deficiency of profits or otherwise) would have been decreased if the rate of excess profits tax had been eighty per cent, in respect of all those periods, and the amount so ascertained and recorded as aforesaid shall, if such conditions as Parliament may hereafter determine are satisfied, be repaid at such date as Parliament may hereafter determine."

I must apologize at this stage for the late presentation of our accounts. It has been held up entirely because we have not been able to agree our basic standard for E.P.T. The Inland Revenue, probably quite rightly from their point of view, want a great deal of information they never wished for before, all tending to justify every penny-piece we spent on expenses account, and if we had sat down and put our staff on to answering their. questions at once the business of the transportation of goods by the company would, if not temporarily have come to a standstill at least have been substantially reduced. We are extremely short staffed and we are doing our best to supply these particulars to the Inland Revenue, but at present we are still in ignorance as to what our basic standard is.

Criticism—Need for Clear Thinking There has been a certain amount of criticism from some quarters implying lack of co-operation by managements of industrial firms in the national effort, and in my view a little clear thinking is needed on this subject. There has also been criticism of the working people on grounds of absenteeism and slackness. May I say this, that in my view the majority of the working people have put their backs a hundred per cent. into the national effort. (Applause.) There have been isolated instances, of course, of slackness, but they are only isolated instances.

The working people have had an incentive, however, apart from any patriotism, which they certainly have, and that incentive is that they have been given increased wages, which, subject to income tax, they have been able to keep. I am also convinced that managements of industrial concerns have put their backs into tlie national effort., although here as in other places there have been certain shortcomings, but there is this difference that the only incentive the managements of industrial concerns have had is their duty towards their country and their feeling of taking part in a great national effort—an increased pecuniary reward has not existed.

To take this company's case as an example, we have been

and are running our vehicles fiat out, ma king use of every bit of space we have. I am not at all sure that we are not in the national interest overrunning our vehicles; nevertheless, we feel it is the only thing we can do. But if we like to take the selfish point of view, we should be considerably better off if we only ran our vehicles at 50 per cent. of capacity. If we did this we should reduce our turnover and have somewhere in the neighbourhood of £180,000 cash in the business, which would enable us to extend our present

ramifications. So that it can be said we are definitely penalizing ourselves without any reward. I do not put this torward as a criticism or a grumble, but simply as a statement that needs saying, to put certain aspects of the national effort into the right perspective. Needless to say, we shall continue to run our vehicles to their fullest capacity and thus do our bit towards smashing the Hun.

Current Year's Prospects Three-quarters of the current year have gone so that I am in a favourable position to tell you what we have done in this period. Our turnover has kept up in a satisfactory manner, but against this we shall have increased expenses. There was a general increase in the industry's wages of 4s. a week last August. Also there has been an increase in the price of fuel. In addition, we have got an alleviation from the Inland Rewenue in so far as the wear and tear allowance has been raised to 30 per cent. This latter item, while it hits our revenue account, is of material benefit to the company, as it does in some measure fulfil what we claim is the proper depreciation on a vehicle. You will therefore gather from these remarks that I expect the profits to be less for the current year than, for the year under review. That is so, but I think when we produce our accounts—subject to there being no, material alteration in the taxation—the profits shown will be a satisfaction to the shareholders.

The report and accounts were unanimously adopted. The retiring directors, Mr. R. P. W. Adeane and Mr. E. C. Simon, were re-elected; the auditors, Messrs. Peat Marwick Mitchell and Co., were reappointed, and the proceedings terminated with a vote of thanks to the chairman, directors and staff.


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