c -IPANY MEETING _ -
RICHARD THOMAS AND COMPANY
PAST YEAR'S OPERATIONS
THE 9oth ordinary general meeting of Richard Thomas and Co., Limited, was held on September 8th in London.
Sir William Firth (the Chairman), in the course of his speech, after referring to changes on the board, said : The year under review has been a disappointing one to our shareholders as indeed it has been an anxious one for your directors who were confronted with three problems: The liquidation of surplus stocks accumu- lated as an insurance against the risk of war; a demand for both sheets and tinplates much below the average of recent years, and supervision of the completion of the development work at Irth- lingborough ore fields, the completion of the Ebbw Vale plant, the training of the workpeople and the running in of the plant.
Despite the disappointing result, it is not without interest to note that the profits for the three years ending March last, after taking care of these heavy starting-up expenses and losses on stocks and extraordinary and capital expenditure written off and exclud- ing credits extraneous to the period, totalled £4,469,197, out of which £1,200,000 has been set aside for depreciation. These figures compare with the prospectus profit estimate for the three years of £4,750,000 and a depreciation allocation of Li,o5o,000.
If it is realised the prospectus estimate of profits did not take into account the nine to twelve months' delay in the delivery of machinery by contractors, but did take into account a contribution from the new plant which did not mature, it will be recognised that the actual profits earned during the three years falling short of prospectus estimate by only £28i,000 was not altogether an un- satisfactory performance. In making this three years' comparison I am, of course, not overlooking the fact that the prospectus trend was upwards over the period, a result which has been spoiled by delays and circumstances beyond our control.
It may be thought that, in view of the poor demand experienced during the year under review, even if the new plant had been ready at contracted dates, the total profits for the three years would still have fallen short of the estimate; this, however, would be incorrect, because since the close of the year under review it has been proved that the new works are capable of producing at a cost substantially lower than it is possible to attain in old type plant and the product produced is vastly superior.
POSITION SOUNDER
From the point of view of the company's balance-sheet our position is sounder than at the time the new capital was issued, because the new works are now operating at a profit and since April, 1936, we have retained in the business £1,2oo,003 via de- predation reserve and the £1,250,000 premium, less redemption and issue expenses, and we have charged to profit and loss account a substantial amount represented by interest on the new and (up to March 31st) unremunerative capital, while our old type plant is today every bit as efficient as it was at prospectus date.
It would be unwise in this period of uncertainty to attempt to forecast what the current year's profits will be, but I am entitled to say that there is no ground for supposing that the net profits of the current year will not substantially exceed the £367,429 earmarked for transfer to general reserve account and this after providing an additional £210,000 for depreciation, bringing depre- ciation allocation up to £650,000 for the year. We have instructed our auditors to examine the whole assets of the company and to report what in their judgement would be a reasonable allocation for depreciation. Your company now possesses one of the finest plants in the world, and our steel capacity is equal to to per cent, of the total ingot capacity of the country, and, what is more interest- ing, some 50 per cent, of this ingot capacity has a book value approximating 25s. 3d. per ingot ton, which is a very low figure.
Further, in normal times, i.e., in times of cheap scrap, this low- capital-cost plant is capable of producing ingots on an f.o.b. basis that compares favourably with any integrated modern plant in this country. The elasticity of this 50 per cent, low capital-cost-steel plant is not generally recognised. It consists of six completely independent units, each with an average output of 120,000 tons of Ingots per annum.
In times of fluctuating demand we are in a position to light up or close down at comparatively small cost these separate units, and thus make possible in times of poor demand to work our Ebbw ale and Redbourn integrated plants fully. Lest any of my remarks made in an attempt to give you a true salue picture of your property should be interpreted by you as optimisticK I would remind you that in times of poor demand our profits must shrink and that we have no control over world conditions or world demand.
The report was unanimously adopted.
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