13 MAY 1938, Page 38

BRITISH OXYGEN YIELD

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The British Oxygen profits are good, but holders of the ordinary shares who bought at high prices will legitimately ask : Are they good enough ? Having emphasised the merits of these shares—in a much happier market environment— .over a year ago, I must confess to mild disappointment that the 1937 profits, excellent as they are, were not larger. The net total, after depreciation, has reached a new high record at £708,675, against L600,279 in 1936: The board has tucked away £150,000 to general reserve and reserve for income tax, has raised the ordinary dividend to 17 per cent., and left £115,212 out of the group's profits for the year in the various subsidiaries. That is good going, but again, in relation to a share which at L31 yields only 41 per cent., is it good enough ?

Two relevant points emerge from the accounts. First, last year's expansion of profits, after allowing for N.D.C., was roughly 23 per cent., against a rise of 33 per cent. in 1936. Thus, the rate of profit expansion slowed down. Secondly, the balance-sheet shows quite clearly that the growth of fixed

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FINANCE AND INVESTMENT

(Continued from page 89o.) assets, plus the expanding turnover of the business, have begun to put a strain on the working capital. Cash has fallen on the one hand and there is a bank overdraft of £200,000 on the other. It is obvious, therefore, that before very long the company will need to raise fresh capital. Now, my reac- tion to both these points is that for the present British Oxygen shares, despite their recent fall, are not well set for a quick recovery, and I do not recommend them as a short-term speculation. But I have not altered my opinion that they are a good long-term holding. This is a progressive company supplying a broadening demand. Temporarily the rate of expansion may be slowed down through general industrial recession, but ultimately shareholders should do very well.