Arrol raises more cash

It seems the floatation of Arrol didn't quite go to plan. Because just four years later they were raising more cash by issuing new preference shares. That is, getting yet more external money while leaving the directors in full control. 

But first the directors had to persuade the existing preference share holders.

"Archibald Arrol & Sons, Limited. - An extraordinary general meeting of the preference shareholders of Archibald Arrol &. Sons, Limited, was held in London yesterday for the purpose of considering resolutions for the increase of the capital of the Company to £400,000 by the creation and issue of 15,000 new preference shares of £10 each. Mr W. A, Arrol, who presided over a small attendance, said the development of the Company's business had not been quite so rapid as at first anticipated, but still the net profits had shown considerable advantage. For the year 1898, after bringing the reserve account up to £12,000, writing down £3000, and making a depreciation allowance of £6000, the net profits were £28,619, showing an increase of fully £8000 on the previous year. During the period from 1st June to 30th November last the business done at the Glasgow and Newcastle offices increased in volume by 31.5 per cent., as compared with the corresponding period of the previous year. The dividends on the ordinary stock had been for the first year 5 per cent., for the second year 6 per cent., and for the third year 10 percent. When the Company was formed in June, 1895, the houses under agreement to take beer from them, and also the houses belonging to the Company, stood at 72. Now there were more than three times that number. When the Company was incorporated the assets were £416,276. and in May last they amounted to £574,395. An increase of capital was now absolutely necessary for the proper conducting of such a good concern, and the directors had deemed it advisable to ask the preference shareholders to give power to increase the capital. He could not, at the moment, say that all this stock would be issued, but the Directors would take good care that it would be issued so as not in any way to be detrimental to the shares of tbe Company. With this increased capital the Directors hoped they would be able to secure and take advantage of certain options on good property which they had and pay off certain mortgages. He then moved the resolution for the increase of capital, and this was seconded by Mr John Meikle. Mr Plowman asked whether the increased capital proposed was or the specific object of buying public-house property in order to secure trade. The Chairman said the capital was wanted to pay off some mortgages and to enable them to assist in the trade, so as to secure their custom. It was not to be sunk in stone and lime. In Scotland the trade was not carried on in the same way as in England. The new stock would be issued at par, and only issued as the Directors saw fit. The trade in Scotland had sent in applications for the stock, so that showed they were very well satisfied with the investment. Other shareholders stated that it would be as well that the balance-sheet should be submitted to the preference shareholders, to which the Chairman said the powers for such circulation would be taken in the article of association. The resolutions were carried in a poll, which had to be taken because there was not a quorum of preference shareholders present in person. The poll showed that 118 shareholders (representing 4796 shares) were for the resolutions, and one shareholder (representing 150 shares) was against. Another motion making the necessary changes in the articles of association was then agreed to.
Dundee Courier - Wednesday 25 January 1899, page 3.

That's quite a pub estate that they'd built up in the four years of the limited company's existence. More than 200. Of course, buying pubs had been the main aim of the floatation. Which is why the directors' assertion that the new capital wasn't to be used for more pub acquisitions is so fascinating. The implication is that it was to be used to boost their Scottish trade, presumably in the form of loans to publicans. An interesting change of tack and a tacit admission that the English tied estate venture hadn't been totally successful.

The profits hadn't rolled in as expected. 5%, 6% and 10% dividends for the ordinary shareholders doesn't sound that bad. Until you start comparing them to the dividends at other Scottish brewers like, say William McEwan. There the directors had received dividends and bonuses of 25% in 1895 and 30% in 1896.

This wouldn't be the last time Arrol fiddled with its capital. A sign everything wasn't going as planned. We'll learn more about that later.