COMPANY NOTES
By CUSTOS THE continued fall in Wall Street and the dangerous arms-lift in the ' Middle East contrived to put most security prices sharply down, except, curiously enough, the gilt-edged market which was encouraged by the success of the Esso deben- ture issue—now 3f premium—and by the further fall in copper and other raw material prices which is regarded as a long-term deflationary factor. I have said before that the inadequate margin of + per cent. between the average yield on industrial equities and that on old Consols is likely to be altered before long by a rise in gilt-edged and a fall in equities. It is not likely to be changed by an increase in industrial dividends, as profit margins are still being squeezed. Oil shares have more than lost their recovery of last week. Now
that the cold war has been revived by a threat to peace in the Middle East, BP shares are once again full of political risk. Nor am I bullish of their half-yearly report for, unlike SHELL. BP has no Venezuelan or Western subsidiary that could take advantage of the Suez hold-up. The excite- ment of the week has been the five-point jump in German bonds on the disclosure by Professor Erhard in an election speech that 'practical schemes for a premature repayment of German foreign debts' are being drafted. This implies that the German Treasury will be buying back in the open market perhaps £25 to £30 million worth of bonds. Everything seems to be going the German way.
The slow decline in the cinema box office goes on-it was 12 per cent, for the year to April last -but the 111 per cent, drop in the net profits of the RANK ORGANISATION up to June 30 was due not to the box office but to the fall in the trading profits of Rank • Precision Industries (the manufacturing subsidiary of Gaumont British), which has come to the end of the profitable cinema re-equipment business. The company hopes to offset most of the decline in cinema profits this year by closing down the unprofitable houses. It also has the advantage of the small cut in entertainment tax. The 121 per cent, dividend was covered three times over and at 8s. 6d. the 5s. shares now give the satisfactory yield of 7.15 per cent. Unlike the Rank Organisation the rival Cinema group-ASSOCIATED BRITISH PICTURE- can now claim that the decline in box-office profits is being offset by profits from television. The chairman-Sir Philip Water-stated in August that the over-all trading position of the group as a whole for the first five months of the current year showed an improvement. This was no doubt mainly due to the good results from ABC Television, which is providing programmes on Saturdays and Sundays in the Midland and Northern areas. There has been some quiet buy- ing recently of AB Picture and at 15s. 41d. the 10s. shares yield 6.35 per cent, on a dividend covered nearly 21 times over.
In commenting the other week on the revival in the gold share market I called attention briefly to the finance houses. I had no space then to develop the investment argument in their favour, which is as follows : First, over the next few years the income accruing to the finance houses
from the new ged mines will expand consider- ably. The development of these mines-in the far west Rand and the OFS-has been the principal work of the finance houses since the war. The job is now largely complete; in many cases the new mines are already dividend-paying. Further capital outlays on other new properties seem unlikely on a large scale. Although,they must always retain a high proportion of their earnings for further mineral exploration and the amortisa- tion of their existing properties, the finance houses should now be able to pay out more to their own shareholders as the dividends they receive from the new mines increase. Secondly, the wide range of mineral and industrial interests in their portfolios lessens the risk of investment in finance house equities. New mineral exploration com- panies have been formed by most of the groups in Canada and Australia as *ell as in Africa. The minerals covered include the rarer metals which are so important in electronics, nucleonics and high-speed flight. I have called attention to UNION CORPORATION and GENERAL MINING. I sug- gest also CENTRAL MINING (which has interests in Canadian oils) to yield 51 per cent. at 69s. 3d., and ANGLO-AMERICAN at 132s. 6d. to yield 5.2 per cent.-all before Dominion income-tax relief.
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