11 FEBRUARY 1938, Page 44


In brighter markets there would surely have been a better response to the excellent results of Thomas Tilling, the road transport combine. This progressive undertaking has not merely increased its net profit from £4o4,6ro to £456,399, a new record, but has decided to supplement its cash dividend of to per cent. by a 25 per cent. scrip bonus. As a general rule I am strongly opposed to the practice of deliberately writing up assets for the purpose of making a capital bonus distribution, but here is a legitimate exception. Tilling's holding of 1,933,142 shares of the Tilling and British Auto- mobile Traction subsidiary, after being written up by £1,164,362, will still figure in the books at no more than £2,020,105, or the equivalent of 20S. r rd. per share. As this company pays a steady Jo per cent. dividend, and itself distributes capital bonuses from time to time, the shares are obviously worth much more than 20S. 11d., and, indeed, command a market quotation of 55s. Despite the write-up, there is thus a substantial hidden reserve in Thomas Tilling's valuation of this holding.

What are the prospects for earnings ? Frankly, I think they are good, although they must always reflect the general state of trade and spending pawer throughout the country. The important paint is that the Tillings combine is operated with great efficiency, and that road-passenger transport, having come to terms with the railways, is now able to rationalise itself and keep down its costs. At the current price of 58s. Thomas Tilling £r ordinaries yield only 31 per cent. on the ro per cent. cash dividend, but the rights to the t for 4 free capital bonus are included in the price. If we allow for the rights and assume, as I think is safe, that the ro per cent. rate will be maintained on the larger capital, the yield is 41 per cent. On this basis the shares look to me a worth-while long-term holding, especially as there should still be sufficient scope for expansion of earnings to justify further scrip bonuses.

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