Kelly & Lewis Information Page
This document was copied from a photocopy of some early Kelly & Lewis documents detailing a brief history of the company. It has been typed up as close as possible to the original layout and format. It will be of interest to Bulldog tractor enthusiasts.
For books on Kelly & Lewis Engines, refer to the Engine section of our catalogue. For Bulldog tractor books, refer to the Lanz section of our catalogue.
PAID CAPITAL - 46,000 6% Cum. Participating to 8% Preference Shares of £1 each, fully paid.............. £46,000 94,000 5% Cum. Preference Shares of £1 each, fully paid....................................... 94,000 280,000 Ordinary shares of £1 each, fully paid..... 280,000 420,000 £420,000
BALANCE-DATE: June 30 ACCOUNTS ISSUED: October. DIVIDENDS PAYABLE: Preference and Ordinary - March, November DIRECTORS: K.P. Lewis (Chairman), E.L. Lewis, L.J. Hartnett, A. L. Bruns. BANKERS: The English, Scottish & Australian Bank Limited AUDITORS: Wilson, Danby & Giddy, Chartered Accountants (Australia)
The formation of the business dates back to 1899, when Geo. W. Kelly and E. Powell Lewis entered into a partnership, which, in 1913, was converted into a proprietary company with a paid-up capital of £50,000 under the title of Geo. W. Kelly & Lewis Pty. Ltd.
When, in 1919, Geo. W. Kelly died, control passed to E. Powell Lewis and his son, E. Llewellyn Lewis, the Kelly interests being gradually purchased by the Lewis family, who, by 1921, owned the whole of the shares in the company.
With the growth and development of the company, a large site at Springvale, adjoining the main Gippsland railway, was purchased in 1922 and the gradual removal of the works from Bourke and Lonsdale Streets, Melbourne, was commenced. The removal was not completed until 1928, by which time, however, the company owned a modern engineering works in a garden setting and had achieved an excellent technical reputation.
Progress and expansion continued until 1930, when the paid-up capital had reached £80,000. In that and the ensuing years up till 1934, the business suffered a severe setback as a result of the world economic depression. In the interim, the second of the original founders, E. Powell Lewis, had passed away, and the company had come under the control of his son, E. Llewellyn Lewis, and Kelvin Lewis, the latter having joined the organisation in 1922.
With the improvement in general economic conditions, the expansion of operations was continued after 1934, necessitating the introduction of outside capital, with the result that by 1938, paid-up capital had increased to £152,646, comprising £46,000 of preference and £106,646 of ordinary capital.
In January, 1939, the proprietary company was converted into a public company under the title of Geo. W. Kelly & Lewis Limited and the preference shares listed for quotation on The Stock Exchange of Melbourne. A year later, the present title was adopted, and, in 1941, the ordinary shares were admitted to the Stock Exchange quotation list.
Further increases in paid-up capital took place in the ensuing years, until the present figure of 420,000 was reached in 1947
The company originally operated as general engineers, and carried out large engineering and constructional contracts, such as those for coal handling plant for Australian Iron & Steel Ltd. at Port Kembla (NSW), river control gates for the Hume Weir, power and boiler house buildings for the State Electricity Commission of Victoria at Yallourn, condensers for electric power schemes and railway bridges in various parts of Australia. During the last 15 years the nature of the business has changed and the company and its subsidiaries operate largely as specialists in the production of standardised lines such as centrifugal pumps, internal combustion engines, air and gas compressor, structural steel, etc.
The company maintains an up-to-date foundry at Springvale (Victoria), where most of the operations of the subsidiary companies are also located.
Kelly & Lewis Limited owns the whole of the capital in the following subsidiary companies:-
K.L. Distributors Pty. Ltd. - Originally formed as K.L. Engines & Tractor Pty. Ltd.to handle the sales of K.L. Engines and imported Lanz tractors, this company adopted the present name in July 1946, when the tractor assets were passed over to the newly formed K.L. Tractors Ltd., established to engage in the manufacture of Lanz type tractors.
The distributing company, which has large showrooms at 460-468 Bourke Street, Melbourne, was designed to provide a sales organisation throughout Australia, and New Zealand, both for the parent company Kelly & Lewis Ltd., and also for the subsidiary companies.
K.L. Distributors Pty. Ltd. owns half the capital in K.L. Tractor Sales Pty. Ltd., formed to become sole distributors of tractors produced by K.L Tractors Ltd.
K.L. Distributors Pty. Ltd. also handles various agencies and representations outside the Kelly & Lewis group, including modern types of spray irrigation equipment (manufactured by Sigmund Co., of England), and rock drills and air compressors (Climax Rock Drill Co., England). A division of the distribution company manufactures K.L.A.M. sectional steel poles and steel fence posts and fittings at Springvale.
A small export trade is conducted with India, South Africa and the Far East, and this is believed to be capable of considerable expansion when the raw materials and labour positons become more favourable.
K.L. Electric Co. Pty. Ltd. (formerly Hodson & Gault Pty.Ltd.) engaged in the production of electric motors, generators, alternators and other electrical equipment.
K. L. Farm Equipment Co. Pty. Ltd. (formerly Crump Manufacturing Co. Pty. Ltd.) manufacturers of agricultural machinery.
Kelly & Lewis (W.A.) Pty. Ltd. formed originally to trade in Crawler tractors, and spare parts, but, in recent years little more than an investment company. It may be liquidated.
A. G. Russell Carriers Pty. Ltd., general carriers, acquired mainly for the carriage of raw materials and finished machinery for Kelly & Lewis Ltd.
K.L. Repetition Parts Pty. Ltd., a small subsidiary established in 1946 to produce small components required in large quantities for the parent and subsidiary companies.
K.L. Laundry Machinery Co. Pty. Ltd., formed in 1946 to manufacture laundry and dry-cleaning machinery under licence from American manufacture
Springvale Foundry Co. Pty. Ltd., manufacturers of iron and brass castings.
Directors - W.T. Harris (Chairman), K. Powell Lewis, A.L. Bruns, E. L. Lewis, W. L. Sanderson, O.B.E., M.C.
Prior to the war, K.L. Distributors Pty. Ltd., a subsidiary of Kelly & Lewis Limited, held an agency for the German Lanz tractor, and from 1934 until 1939, these tractors were distributed throughout Australia solely by the company. During the war, due to the cessation of supplies from overseas, it was found necessary to make arrangements for the local manufacture of spare parts, and this led to investigations into the possibility of manufacturing complete tractors in Australia.
In the course of these investigations, account was taken of the fact that tractors (other than caterpillar or steam types) imported into Australia during the three immediate pre-war years were as follow:-
1936/37............5,886 1937/38............3,525 1938/39............3,567
On examination of the known sales of the imported Lanz tractors in face of strong competition, it was estimated that Australia was likely to purchase at least 1,000 tractors of this type yearly, and that production on this basis would be economical. In arriving at this conclusion the company had the knowledge that in Victoria and the Riverina alone, orders for 310 tractors of this type had been booked in 1939, also, that, due to the war, there was a banked-up unsatisfied demand for tractors throughout Australia and New Zealand.
A further deciding factor was that during the war, Kelly & Lewis Ltd. had manufactured for the Grain Elevators Board of Victoria 150 stationary diesel engines of the Lanz tractor single cylinder type.
The results of the investigations led the company to a decision to pioneer the manufacture of tractors in Australia; accordingly, on 5th September 1946, a new company, K.L. Tractors Limited, was registered with an authorised capital of £500,000 to undertake this work.
An issue of 175,000 ordinary shares of £1 each was made to the public by K.L. Tractors Ltd., and was fully subscribed. Simultaneously, a new company, K.L. Tractor Sales Pty. Ltd., was formed to undertake the distribution of tractors and tractor parts. Issued and paid-up capital of this latter company was £50,000 subscribed as follows:-
25,000 shares to K.L. Tractors Ltd. for cash. 25,000 shares to K.L. Distributors Pty. Ltd.
In the latter case, the shares were issued as consideration for -
(a) spare parts taken over £3,000; and (b) goodwill of the tractor and tractor parts sales business of the said K.L. Distributors Pty. Ltd., £17,000
On completion of this arrangement, the issued capital of K. L. Tractors Ltd. was £200,000 in shares of £1 each, of which 10/- per share was payable on application and allotment, with subsequent calls of 5/- per shares as required. This capital has since been fully called up.
The plans provided for - (a) The erection of an assembly plant adjoining the works of Kelly & Lewis Ltd. at Springvale (b) The establishment of a foundry for the production of grey iron castings at Hobart (Tasmania); and (c) The sub-contracting of the production of most of the component parts for the tractor.
Early operations were delayed by the prolonged metal trades strike in 1947, and by shortages of building and other materials, but, by September 1947, K.L. Tractors Let, was able to exhibit a prototype at the Royal Melbourne Show.
By the end of 1948, the Springvale assembly factory was complete and equipped, whilst the Hobart foundry (the building for which was provided by the Tasmanian Government and leased by the company) was producing grey iron castings. Whilst some of the components had been delivered on schedule by the sub-contractors, others had been subject to considerable delays.
It was, however, announced by the directors that the first commercial deliveries by the company of tractors would be made in March 1949.
Although the company has derived some small revenue from the sale of tractor parts, the period formation has been one of establishment and development, and, 30th June 1948, the company showed a deficiency of £52,188
As at that date, the assets position was as follows:-
As at June 30 PAID-UP SHARE CAPITAL - 1947 1948 Shares of £1 each, fully paid £25,000 £200,000 Shares of £1 each, called to 15/- 131,250 - £156,250 £200,000 RESERVES AND UNDIVIDED PROFITS - Profit and Loss Appropriation Account carry forward Dr.18,354 Dr.52,138 TOTAL SHAREHOLDERS' FUNDS £137,896 £147,812
CURRENT ASSETS - Cash £63,099 - Debtors 302 £1,466 Stock (cost) 2,611 71,546 Prepayments 26 72 £66,038 £73,084 Less CURRENT LIABILITIES - Bank Overdraft - £48,814 Creditors and accrued Charges £4,511 32,318 £4,511 £81,132 EXCESS OF CURRENT ASSETS £61,527 Dr.£8,048 Add FIXED ASSETS - Freshold Land, buildings (cost) 2,186 43,862 Plant, Machinery (cost) 14,625 35,367 Patterns, Tools, Gauges (cost) 560 15,059 Furniture, fittings, Vehicles (cost, less depriciation) 2,280 4,854 Shares in K.L. Tractor Sales Pty. Ltd. (cost) 25,000 25,000 NET TANGIBLE ASSETS £106,178 £116,094 Add INTANGIBLE ASSETS - Designs, Drawings, Technical Data (cost) 25,000 25,000 Preliminary Expenses £155; Underwriting £5,563 5,718 6,718 £137,896 £147,818
NET INTANGIBLE ASSETS PER £1 SHARE 15/- 11/7
During the war years, the normal operations of Kelly & Lewis Ltd. were almost completely subserviated to munitions work, paid for mainly on a "cost plus" basis. This resulted in substantially lower earnings in the early war years, followed by three years of virtually static profits. However, after reversion to normal activities at the end of the war, and with the assistance of new capital, earnings were materially increased. The preference dividends have been paid regularly, whilst ordinary dividends have been at the rate of 8 per cent per annum in every year except 1943 and 1948, when the ordinary dividend rate was lowered to 6 per cent. Profits, dividends and reserves of the company and its subsidiaries for the last 10 years are shown in the following table:-
---Net Profit--- ---------D i v i d e n d s--------- Reserves & Year to % to Total Part. Pref 5% Pref Ordinary Undivided June 30 Amt. Capital Amt % p.a. Amt Amt % p.a. Profits* 1939 £19,799 13.7 £3,680 8 - £7,900 8 £31,631 1940 5,545 3.7 2,760 6 - 5,266 5 29,150 1941 15,551 10.2 3,680 8 - 8,532 8 32,576 1942 13,274 8.7 3,680 8 - 8.532 8 34,716 1943 13,335 8.7 3,680 8 - 8,532 8 35,840 1944 18,240 11.9 3,680 8 - 8,532 8 41,868 1945 18,328 10.1 3,680 8 - 10,878 8 45,638 1946 18,140 9.3 3,680 8 - 11,944 8 48,154 1947 19,039 9.7 3,680 8 - 12,061 8 81,467 1948 28,131 6.7 2,760 6 £4,700 16,800 6 85,400 * Subject to intangibles, £33,247 in 1948. Paid by way of share issue
As at 30th June, 1948, the consolidated balance sheet of Kelly & Lewis Ltd. and its subsidiary companies showed a sound financial position as set out in the attached statements of assets and liabilities.
Whilst outside liabilities total £424,165, including a secured bank overdraft of £292,026, current assets (including stock on hand, work in progress, etc. £487,391 and debtors and contract deposits £173,716 are valued at £664,546. Fixed assets, including freehold land and buildings £68,645, plant and tools £124,544, and shares in other companies £52,000, have a book value of £269,440, representing cost less depreciation. Intangible assets are relatively small at £33,247. Subject to the intangibles, reserves and undivided profits amount to £123,068.
As at June 30 PAID-UP SHARE CAPITAL 1947 1948 6% Cum/8% Pref. Shares of £1, fully paid £46,000 £46,000 5% Cum. Pref. Shares of £1, fully paid 94,000 94,000 ordinary Shares of £1, fully paid 230,000 230,000 £420,000 £420,000 RESERVES AND UNDIVIDED PROFITS - General Reserve 40,762 40,810 Share Premium Reserve 28,121 28,121 Tax Paid Profits Reserve 22,124 31,800 Contingencies Provision 1,624 1,780 Profit and Loss Appropriation Account carry forward 28,713 20,540 TOTAL SHAREHOLDERS' FUNDS £541,344 £543,000 These are represented by Net Assets as follows - CURRENT ASSETS - Cash on hand and at bank £36,702 £705 Government securities (cost) 1,080 1,080 Sundry debtors (less provision); Contract Deposit 100,100 173,716 Stock on hand, Work in Progress; etc. (cost or under) 307,160 487,391 Prepayments 2,538 1,654 £447,580 £664,546 Less CURRENT LIABILITIES Bank Overdraft (secured) £64,784 £292,026 Loan and Deposit Accounts 8,250 9,250 Creditors, Bills Payable, Accrued Charges 94,998 98,157 Provision for Taxation 16,986 12,602 Provision for Final Dividends 9,882 12,130 £194,900 £424,165 EXCESS OF CURRENT ASSETS £252,680 £240,381 Add Shares in Other Companies (cost 52,000 52,000 Add FIXED ASSETS (cost, less depreciation) - Freehold Land, buildings 68,539 68,645 Plant, Tools 117,214 124,544 Office Furniture, Fittings, Vehicles 14,842 20,377 Life Assurance Policies 3,473 3,874 NET TANGIBLE ASSETS £508,748 £509,821 Add INTANGIBLE ASSETS (cost, less depreciation) - Trade Marks, Patents, Patterns 6,217 6,866 Underwriting Commission 4,955 4,955 Excess of Book Value of Inter- Company Holdings over Par Value 21,424 21,426 £541,344 £543,068 NET INTANGIBLE ASSETS PER £1 SHARE - 6%/8% and 5% Preference £3/12/8 £3/12/10 Ordinary 26/4 26/5 SHARE PRICE RANGE : 1946 : 1947 : 1948 : 1949 (to 9/3/49) ------------------:------------:------------:------------:----------------- : High Low : High Low : High Low: High Low :------------:------------:------------:----------------- £1 6%/8% Pref.... : 27/- 25/6 : 32/- 29/9: 34/- 26/6: 25/- 25/- £1 5% preference. : Issued 1947: 23/3 21/-: 23/- 20/-: 20/6 20/- £1 Ordinary...... : 27/- 24/3 : 33/- 25/6: 29/9 22/9: 22/9 20/- : : : :
Kelly & Lewis Ltd. enjoys a good technical reputation, backed up by the possession of a modern research laboratories, and its products have a good name and a wide sale. In respect of organisation and business acumen, the company is not so highly regarded and it has made continual alterations in its general plan of operation. The practice has been adopted of converting many of its manufacturing departments into proprietary companies, and, whilst this is a fairly general practice amongst the larger Australian industrial organisations, the system frequently leads to excessive overhead, duplication of staffs and lack of economy and overall control.
From time to time, the management has been subjected to criticism in the investment market, the most recent instance being in regard to the terms on which it acquired from the present Managing Director (Mr. A.L. Bruns) the shares in two of the subsidiary companies, K.L. Distributors Pty. Ltd. and Kelly & Lewis (W.A.) Pty. Ltd. The terms of these acquisitions were as follows:-
For 6,000 shares in K.L. Distributors ) Pty. Ltd. and ) 23,333 ordinary ) shares of £1 each For 4,000 shares in Kelly & Lewis ) in Kelly & Lewis Ltd. (W.A.) Pty. Ltd. )
For the purpose of the transaction, the shares in Kelly & Lewis Ltd. were valued at 30/- each, or a total of £35,000.
The shares in K.L. Distributors Pty. Ltd. were valued at £4 each, giving an assumed value of £24,000 for the 6000 shares transferred whilst the 4000 share in Kelly & Lewis (W.A.) Pty. Ltd. were given a value of 25/- each, or a total of £5,000.
Thus, Mr. Bruns received shares in Kelly & Lewis Ltd. of an assumed value for the purpose of the transaction of £35,000 in exchange for shares in the subsidiaries to which a total value of £29,000 was attributed.
The company's statement relating to this transaction was as follows:-
"To arrive at this assessed valuation of 29,000, in the subsidiaries, the book value of the shares in K.L. Distributors Pty.Ltd., has been adjusted, based on, inter alia - 1. Sale of goodwill and intangible assets by K.L. Distributors Pty.Ltd. to K.L. Tractors Ltd., and K.L.Tractor Sales Pty. Ltd................ £33,999 2. Write up in value of 9,500 shares owned by K.L. Distributors Pty. Ltd, in Hodson & Cault Pty. Ltd. from £1 to £3 per share.................. 9,500 3. Write up in value of 10,000 shares owned by K.L. Distributors Pty.Ltd. in K.L. Laundry Machinery Co. Pty.Ltd. from £1 to £2/5/- per share...... 12,500 £55,996 "As Mr. Bruns holds one quarter of the shares in K.L. Distributor Pty. Ltd., the foregoing increase of £55,996 accounts for £13,999 of the £35,000 consideration being paid to him. "In arriving at the purchase price of the interests of Mr. A.L. Bruns in Subsidiary Companies, consideration was given not only to the asset backing of the shares in the companies concerned but to the future earning capacity of K.L. Distributors Pty. Ltd., due to the great expansion in recent years of the activities of your company and its subsidiaries, which has been largely due to the enterprise and business ability of Mr. Bruns, and the loss of income that he will suffer by reason of his relinquishing these shares. "For some time past, it has been clear to both the Directors and the Auditors of your company that as the subsidiary companies developed and expanded, more and more difficulty would be experienced in preserving a correct balance between the earning power of the parent company and its subsidiaries, seeing that the products of the whole group were being sold and distributed through a common distributing company, and that the profits attributable to the parent company and the subsidiary manufacturing companies would, consequently, become more and more a question of arbitrary arrangement. Under these circumstances, it was decided that the only wise and safe course to adopt would be the acquisition of the minority holdings in the subsidiary companies by the parent company." "Mr. Bruns has been associated with Kelly & Lewis Ltd. since 1934, becoming the Managing Director of K.L. Distributors Pty. Ltd. (then K.L. Engines and Tractors Pty. Ltd) in 1938, General manager of Kelly & Lewis Ltd. in 1940, and a director of your company in 1945. He will continue his association with the company as Managing Director of Kelly & Lewis Ltd., and subsidiary companies under a service agreement made concurrently with the sale of his interests in subsidiary companies for a period of three years from the 1st July, 1947."
The general business of Kelly & Lewis Ltd. is undoubtedly capable of expansion, but the opinion has been expressed that the company has "too many irons in the fire" and that a reorganisation and consolidation of activities in overdue.
So far as K. L. Tractors Ltd. is concerned, the project has yet to be proved, and experience of large-scale manufacturing of this type, in a new country particularly, shows that the road to profitable productions is a long and arduous one, requires great technical and organising capacity.
In past statements, the directors appear to have been unduly optimistic, and the most efficient overall control and management, including the progressing of component manufacture by sub-contractors will be required to encompass success.
There is no doubt that a substantial market exists for tractors of this type, but the cost factor will require the closest supervision, and regard must be had for the future course of commodity prices and its effect on the purchasing power of the primary producer.
9th March, 1949
KELLY & LEWIS LIMITED At 29/10/46 At 5/11/48 E. L. Lewis .. .. .. 6,439 6,789 E. P. Lewis (deceased) .. .. 22,680 26,680 K.P. Lewis .. .. .. 20,446 24,000 A.L. Bruns and wife .. .. 700 20,333 L. Harnett .. .. .. - 3,000 Australasia Nominees (presumably Sir Wm. Angliss) .. .. Not Extracted 16,000 K.L. TRACTORS LIMITED At 30/9/47 At 15/11/48 E. L. Lewis .. .. .. 250 250 K.P. Lewis .. .. .. 250 250 A.L. Bruns .. .. .. 250 250 Elder Smith & Co.Ltd. .. .. 750 750 K.L. distributors Pty. Ltd. .. 25,000 25,000 Cash Orders Amalgamated .. 1,800 1,800 R.P. Donaldson .. .. .. 1,000 - R. Gordon Johnstone .. .. 1,000 1,000 J.T. John (a director of M. B. John) - 1,000 T.G. Murray of Sydney (is this the sharehawker??) .. .. - 1,000 K.L. DISTRIBUTORS PTY.LTD. At 30/9/47 At 15/11/48 Kelly & Lewis Ltd. (6,000 sold to to K. & L. Ltd. on 26/5/47 by A. L Bruns and wife) .. .. 24,000 23,997 A. L Bruns .. .. - 1 E. L. Lewis .. .. - 1 K.P. Lewis .. .. - 1 --------- 9/3/49