The Express.
London, England, 1867-08-24 00:00:00

LONDON, BRIGHTON, AND SOUTH COAST.

The report of the directors, to be submitted to
the meeting of the proprietors to be held on Friday,
I says the present board having only taken office on the
2nd of July last, are not responsible for the results of the
put half-year as shown in the subjoined accounts. It
ts incumbent, however, on them to record shortly the
state of things which they found on assuming office, both
in justice to themselves al showing the starting point from
which their responsibility commences, and the results
which follow from • system of disguising disagreeable
I truths by fictitious dividends. With this view they think
it right to subjoin the reports of Messrs. Price, Holyland,
I and Waterhouse, which were made to the committee of
investigation too late for publication, as they contain the
fullest information as to the actual condition of the com-
pany. From the position of those gentlemen as profes-
sional accountants to the auditors of the London and
North Western Railway, there can be no higher authority
as to the fasts and figures. The first question is how far

the published accounts for the year 1866 can be taken as
correct. These amounts showed that while the amount of
paid-up capital had increased in twelveyeanabys,o72,oool.,
or from 7,690,000/. to 15,762,000/., the net revenue had
nominally increased by 113,000/. only ; and dividends were
declared amounting to &2,7021. on the preference stocks,
and to 214,6121., equal to 4 per cent. per annum, on the
ordinary stock. This result was attained by charging
175,178/. for interest to capital, and by showing a work-
ing expenditure for the year 1866, of 686,884/., equal
to 579 per cent., on a gross revenue of 1,189,944/a
The reports of Messrs. Price, Holyland, and Water-
house show that these results are altogether fallacious.
The total working expenditure for the year 1866, pro-
perly chargeable to revenue (exclusive of interest charged
tO capital), is stated by them, from a careful examinatiou
of the accounts, to be 807,204/., instead of 686,884 J., as
shown by the published amounts, being at the rate of 68
per cent. on the revenue. Mesas. Price, Holyland, and
Waterhouse recapitulate as follows the amounts which in
their opinion should have been chargedto revenue, in addi-
tion to those contained in the published accounts. Main-
tenance of way, works, and stations, 27,918/. Bs. ; loco-
motive power, 10,2681. sa. 2d. ; carriage and waggon de-
partment, 28,4611. 12s. ; law and parliamentary charges,
44,681/. 11.. 6d. ; printing, new shares, Scc., 5,2501. 35. 3d.;
commission on issue of stock to contractors, 2,144!. 19s. Bd.;
additional lose on the Chant el Islands Stale. 1,664/. 10s. /xl. ;
total, 120,379!. 10a. The interest upon the expenditure
for works in progress in 1866 was 175,1781. 2s. 3d.
They state that "If the investigation were carried back
for previous years, the sum to be charged to revenue to
the relief of capital would be greatly increased, especially
for interest on works in progress, which alone during the
last nine years amounts to 435,0001. Assuming that part
of this would be chargeable to revenue, a very large
amount, erroneously charged to capital in respect of this
and other items, must so remain or be liquidated by
future annual apportionments to revenue account." The
directors wish that they could disprove these statements,
but it is unfortunately only too true that for some time
past the actual expenditure properly chargeable to revenue
has been greatly in excess of that shown by the published
accounts, and dividends have only been paid by a whole-
sale system of charging to capital not only interest on new
lines, but repairs, renewals, law charges, and other am
cruing expenses on completed lines. Thus during the
years 1865 and 1866, the following charges were made to
capital irrespective of an outlay of 2,682,X,361. upon new
works in program :

Total in
1865, 18011. 2 years.
Plant 167,667 1170,422 L218,0c0
Ls., parliamentary charges, Lc. 20,3118 40,000 139,004
Charges In respect of opened lines 164,01 168,6116 332,6017
interest

Total 0373,419 £551,697 6996,118
Some of these charges belong legitimately to capital, being
for the first establishment of now lines recently opened,
but there can be no doubt that • great part of them repre-
sent either:-Ist, charges obviously made to disguise
inadequate charges to revenue as for renewals of perma-
nent way and plant, for which less was charged to revenue
in the years 1865 and 1866, with • train mileage of 4}
millions of miles per annum, than was charged in 1856
and 1856, with a train mileage of less than 2 millions ; or,
2ndly, charges for objects which cannot be expected to
bring in any fresh revenue as for law, improvements toexist-
jog lines and stations, interest on outlay on works entirely
unproductive, or which will have to be abandoned, &o.
It is evident- that raising capital to meet such charges by
preference stock at a high interest is a ruinous process
while it lasts, and that the time must come when the
true state of things can no longer be concealed by fictitious
dividends, and when, consequently, the capital account in
courpulwerily closed by the impossibility of issuing fresh
stock. If capital could not have been raised, it is obvious
that the whole of the above outlay of 926,116/. moat either
not have been incurred, or it must have been a clear
addition to the working expenditure, in which case
the whole of the gross revenue for the two years would
have been exhausted, except the sum of 138,872/., which
would have been insufficient to pay the debenture interest
alone for one year. There seems no valid ground, there-
fore, to question the conclusion of Messrs. Price, Holyland,
and Waterhouse that the real working expenses of the
year 1866, exclusive of interest, have been at the rate of
68 per cent. on the revenue, and it will be presently seen
that this is confirmed by the accountsof the hall-year
which has just expired. With this correction the
net income of the year 11466 was 383,000/., or actu-
ally less by 7,000/. than it was twelve years
ago, after having raised 8,072,0001. of additional capital.
It cannot be said that this result is owing to the new lines
not being opened, for beyond the above 8,072,000!. of ad-
ditional capital, further liabilities on capital account had
been incurred, exceeding 2,000,0001., while the late
directors' estimate of traffic from the new lines, which it
was thought worth while to complete, was 156,0001. a year
gross, or 78,000!. net. The only legitimate deductions
from the rate of working expenditure shown by the
accounts of 1866 appear to be the amount of corupenution
for accidents, which was eery large (and it may be hoped
beyond the average of ordinary years), and some arrears of
ke., from former years, amounting to about 16,000!.,
which were brought into account and extinguished.
Making every allowance, however, it is impossible to
escape from the broad fact that the present board inherits
• state of things in which-14. The actual working ex-
poucliture has been, and is at present, at • rate of not less
than say 65 per cent. of the gross revenue. 2nd. The bond
fide net income is not greater than it was twelve years
ago, when the capital was less than half its present amount.
As regards the immediate financial position of the com-
pnny when the present directors assumed office, the sub-
joined report of Messrs. Price, Holyland, and Waterhouse
shows that on the 3rd June, the liabilities were estimated
by them as follows, irrespective of the company's liabili-
ties to the benevolent and other funds, amounting on the
31st May to 61,1291. 7a. 4d.: 1. Claims due, and for which
immediate provision will have to be made, 297,6371. ;
2, accruing liabilities to be provided for as the works pro-
gress and loans flul due, 509,683/. ; 3, estimated liabilities
in respect of works abandoned or in suspense, 430,000/. ;
4, Union Bank, 551,150/.; 5, amount stated tobe due by capi-
tal account to revenue account, 166,8261. ; remaining sub-
scriptions to other lines, 282,184/. ; intrest on deben-
ture and mortgage debt due in June and July, 18117,
85,697/. ; total, 2,323,1771. Nos. 3 and 6 in-
clude amounts claimed in respect of the Surrey'
and Sussex, Chichester and Midhurst and West
Sussex Junction Lines, but the directors do not admit
these claims, and the legal relations between the Brighton
Company and these several lines and the liabilities of the
promoters of them, are now engaging the anxious con-
sideration of the directors and their legal advisers.
After alluding to the recent arrangements for raising
capital, the report says :—lt remains to state the re-
sults of the past half-year, ending June 30, 1867:—
Amount of capital raised end of half-year—ordinary stock
and shares, 5,374,595/. ; preferential stock and shares,
7,170,0841. • mortgage debt and debeature stock, 4,089,1161.;
total, 16,6d3,795/. ; gross , 538,1121., being an in-
increase of 18,810/. over the oorrespondingbalf-yearof 1886.
It may be observed that the small increase of receipts
over the corresponding half-year of 1866 is fully accounted
for by the unusually severe weather during the winter and
spring, and by the loss of traffic consequent on the engine
driven' strike. Also that the increase in the coaching
traffic charges Is mainly owing to en unusual amount of
compensations, upwards of 23,000/. having been paid
during the half-year. The accounts thus stated, inclusive
of rents and tolls from other companies, would have
shown a net earning of 211,820/. for the half-year. and as
63,000/. of interest would probably have been charged to
capital for the half-year, this would have shown sufficient
to pay all the debenture and preference interest, with a
surplus of 3,000/. It is probable also that under the old
system the replacement of vehicles broken up, the
extra compensations and a portion of the rates and
taxes, would have been carried over to the next and
most profitable half-year, and thus a dividend might
have been declared on the ordinary stock. Such a result
would, however, have been entirely fallacious and unjus-
tifiable, as it woald have only been attained by charging
to capital and swims* accounts large sums which were
really chargeable to revenue.
['Me foregoing are the chief portions of there port, which
is of • most elaborate character, giving full details under the
six headings respecting current revenue, expenditure, de.
Messrs. Price and Co.'s report to the committee of in-
vestigation is appended.)

WEST LONDON RAILWAY.—The half-yearly ge-
neral meeting of shareholders was held yesterday after-
noon at the offices, 16, Tokenhouse-yard, Mr. William
Hartridge in the chair. The following report was pre-
sented :—" The directors regret their inability to report
any farther proreas in their desired object for extin-
guishing the M est London Company. They can only
recommend the re-appointment of the committee consti-
tuted for the purpose of endeavouring to bring about such
arrangement. It appeared from the statement of ac-
counts presented that the receipts up to the 30th of June
last amounted t 0317,512/. 186.5 d., and that the disburse-
ments for the same period were 316.'J441. se. 2d., leaving
an available balance on deposit of 550/., and on current
account 18/. 13s. 3d. The report and accounts were for-
mally received and adopted, and the committee having
been re-appointed, in accordance with the recommenda-
tion of the directors, the proceedings terminated.
LONDON AND GLASGOW ENGINEERING AND IRON
SHIP-BUILDING COMPANY (LIMITED),—The report of this
company shows, after writing off 1,0001. from preliminan,
expense. and making reserves for depreciation, an avail-
able total of 9,096/. A dividend of U. per share, being
at the rate of 44 per cent, per annum, is reoommended,
which will absorb 4,5571., and leave 4,5411. to be carne.
forward. The amount of the proposed dividend has been
limited by the consideration that the present depressed
condition of the trade is likely to continue for some time,
and it is added that " the balance remaining, with the
present available capital, will be sufficient to enable the
directors satisfactorily to conduct the business of the
company."
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