INTERNATIONAL TEA RECOVERY
The latest accounts of International Tea Stores will please the majority of shareholders, even if they disappoint the market optimists. Revenue has risen by £61,000 to £687,042, which would have allowed the board to increase the dividend had they been so minded. In merely main- taining the ro per cent. rate, which is covered by earnings of nearly 19 per cent., they are following a conservative course, which seems to me to be appropriate to the circum- stances. While retail-profit margins have slightly improved, competition in the provision trades remains very keen, and the wage level accepted by the Multiple Shops Association is not yet obligatory on all retail establishments. From the report now issued it seems that International Tea has been able to win its way back to the 1936-37 level of earnings, but this still leaves profits about £150,000 below the average figures of 1931 to 1936. As for the assets position, this can now be assessed in the light of a consolidated balance-sheet. There is a goodwill figure for the group of £1,555,080, reserves and profit balances, subject to appropriations, amount to £2,218,522, and there is an adequate surplus of liquid assets over current liabilities.
What of the outlook? I think it is promising, but not wildly exciting. So far as one can tell, competition in the provision trade is going to remain very keen for a long time ahead, so that actual profit margins, although they have latterly improved, will be held down. I feel, on the other hand, that the total volume of trade must be gradually in- creased as a result of the larger spending power of customers in the " armament "-districts. All in all, therefore, I should expect a further increase in this company's earnings, and a modest rise in dividend. At IIs. the 5s. ordinary shares are yielding just over 41 per cent. on the to per cent. rate now in force. They are worth holding for recovery.
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