Saturday, 17 October 2015

All's well at Allsopp

Never blindly believe everything in newspapers. The article below certainly proves that.

I accidentally unearthed it during a search of the newspaper archive for Luncheon Stout.

Considerable attention is being given to the shares in Samuel Allsopp and Sons, Limited, and the tendency of the market is remarkably good. Investors therein are for the most part substantial people, and are in no need to part with their holdings in view of the promising position and outlook. There is still room for a good rise in this security, which cannot be said to stand at anything like its proper value. On their merits both the 6 per cent preference and 7 per cent, preferred ordinary stocks and the deferred ordinary shares, which the dividend is limited to 7 per cent, until the reserve fund amounts to £1,100,000, should all be considerably higher, we should not be surprised within a very few weeks to see the preferred ordinary standing at some fifteen points higher than now. There is every reason to believe that the current financial year — just drawn to a close — has been good a one; in fact, the best the Company has ever experienced. It will doubtless prove pleasant news to the shareholders to learn that the anticipations announced the Chairman at their last general meeting are likely to be more than realised. The present management of the concern seems to be thoroughly up-to-date, and this fact is amply emphasised by the progress made in all directions during the post twelve months. It is a well-known fact that the Company always holds a large stock of hops and other raw material, and it is said that, for this reason, the high prices ruling for these commodities for some time past have not injuriously affected the profits of the undertaking, as has, in many instances, been the case with similar concerns. In the purchase of properties, great discretion has, it is well known, been used the Directors, who have only acquired on a sound business basis the best class of establishments reasonable prices. There is abundant proof of this in the fact that many houses offered to Allsopps at certain figures and declined have been purchased by other brewers at greatly enhanced prices. This is common knowledge in the trade, and disposes of the arguments used by ill-informed critics that the Company hat been buying tied houses in a somewhat reckless way. The pale ale being turned out the Company is, in the opinion of experts, of the very highest quality. There is, as a consequence, practically no “return” barrelage or dissatisfaction among the customers of the firm. Their introduction of light dinner pale ale and luncheon stout for families has been an unqualified success. The general policy is such that practically no bad debts are incurred. In addition to all this, the Company has recently secured several valuable catering contracts in various parts of the country. The board, too, has just decided on the addition of a wine and spirit department to their colossal business. The result of this will be an immediate and considerable increase of the Company's profit-earning capacity, which will add materially to the value and security of the shares as an investment and be an encouraging item of news for the large body of shareholders, who will have good reason to thank the Hon. Percy Allsopp, Chairman of the Board, and his able coadjutors. Indeed, the outlook all round for Samuel Allsopp and Sons, Limited, is of a particularly bright and reassuring character, which it should be in the case of one of the most important industrial concerns in the country."
Lichfield Mercury - Friday 15 July 1898, page 7.
 Sounds like the prospects for the company are wonderful, doesn't it? Er, not really.

The 1890's were one of the best decades ever for the British brewing industry. A brewery that wasn't generating healthy profits was doing something seriously wrong. And was likely to be in deep financial doodoo in the following decade, when things got much tougher for brewers.

Just three years later chairman Percy Allsopp had departed, the company was unable to pay a dividend and had to write off a big chunk of its capital. The reason? A fall in sales and reckless spending on pubs and businesses not directly connected with brewing.

An Absolute Loss of £1,670,000.
Strong Terms of Censure.

The report for the year ended June 30 shows that the gross profit amounted to £432,307, and working expenses and other charges £275,868, leaving a net profit of £156,439, which is raised £165,773 by the addition of £7335 brought forward. Debenture interest required £123,640, and interest the 7 per cent. Trust certificates a further £33,003, which left the small balance of £7129 be carried forward. No distribution is therefore possible upon the £3,300,000 of Ordinary and Preference capital. The directors state that about half the falling off in profit is due to the extra duty. Every endeavour has been made to bring into account every charge due or accruing, and a re-valuation has been made of the stock of bottles and cases, the accumulated deficiency being charged to revenue, with the result that somewhat more than the twelve months' normal charges were thrown upon this year's account. The value of the beer sold was about 4 per cent. less than the preceding twelve months. Considerable progress has lately been made towards the realisation of unproductive assets, but the benefit of, these operations does not appear in the present statement. The auditors in their report stale that the effect has been given in the balance sheet to the valuation made by the directors of assets and liabilities of the company, the assets having been written down to the values set out in their special report to the shareholders. No depreciation, however, has been written off the business premises or goodwill since the formation of the company. The committee appointed by the stock-holders at the meeting held July 9 has also issued its report, which is apparently unanimous. After having gone most carefully into the principle of the valuation of the properties and loans of the company, the committee confirms the statement that the company has to face an absolute loss of £1,670,000, or £1,430,000 after giving credit for the reserve. Most of this loss was incurred owing to the absolutely reckless manner in which money was laid out during the last two years of Mr. Percy Allsopp's chairmanship of the company, and the committee are of opinion that no terms of censure are too strong to pass upon him, and the directors of the company during that period. The committee then discuss how the loss of £1,430,000 should be provided. From a strictly legal point of view the whole of the Deferred Ordinary and £330,000 of the Preferred Ordinary capital has been lost, but in their view exceptional circumstances make it desirable to look the matter from a different standpoint, and they therefore think that the Preferred should meet the Deferred in the matter of the capital loss, and that the 6 per cent. Cumulative Preference stockholders should be asked help make matters easier, consenting to a moderate reduction of interest. It is therefore, recommended that the loss be met by writing off 80 per cent. from the Deferred Ordinary capital, thus providing £880,000, and 50 per cent. off the Preferred Ordinary capital, thus providing £550,000, or a total provision £1,430,0110, and that the remaining £770,000 Preferred Ordinary and Deferred Ordinary capital be merged into a new stock forming the Ordinary share capital of the company, of which £550,000 be apportioned to the Preferred Ordinary stockholders, and £220,000 to the Deferred Ordinary stockholders, provided that the 6 per cent. Cumulative Preference holders consent to a reduction of interest to 5 per cent. The voting power will be vested in the new Ordinary stock, but in the event of the company being further in default of the Cumulative Preference stock, the committee recommend that the Cumulative Preference stockholders should have one vote for each £200 of stock so long as their dividend is in default."
Sheffield Independent - Friday 23 August 1901, page 6. 

A company having these sorts of problems in 1900 was going to have some very difficult years ahead. Which is exactly what happened to Allsopp. In 1913 they had to call in the receivers. The company survived, but merely limped along until the 1930's when it was bought up by Ind Coope.

1 comment:

Anonymous said...

Any idea what's the meaning or origin of the red hand symbol for Allsop's beers?