MHE decision to offer conversion stock for I only £500 million of the £758 million 41 per cent. Conversion stock maturing next February reveals the excessive financial strength of an over-deflating Treasury. The conver- sion offer is into £200 million of the existing 51 per cent. Funding, 1982-84, and £300 million of 6 per cent. Conversion stock, 1972—an en- tirely new issue. This in turn reveals the ex- pensiveness for the Budget of the excessively dear-money policy still pursued by the Treasury. The present manoeuvre is good for the market in short-dated bonds, as it reduces the supply, and 1 would urge surtax payers to step up their pur- chases of Savings 21 per cent., 1964-67, which becomes a 'short' in May next, when its final redemption date becomes five years. At 85 it grosses 5.85 per cent. to gross redemption and 7.7 per cent. 'grossing up' the tax-free gain. The next cheapest short is Exchequer 3 per cent., 1962-63, at 96k; it yields 5.75 per cent. and 7.35 per cent. respectively.
If a steel company chairman cannot see ahead, the investor cannot be blamed for not anticipat- ing the slump in steel shares—now 35 per cent. down from their April peak. In August the CONSETr chairman was expecting to pay a higher dividend; he is now passing the interim! At the rights issue of COLVILLES in July it was stated by the directors that the profits after deprecia- tion and taxation would not be very different from the previous year; but it is now disclosed that, before charges, profits were 15 per cent. down. The investment allowances are mainly responsible for the fact that the net profits show only a modest decline. The final dividend of 71 per cent. and lower profits had been forecast by UNITED STEEL; net profits are, in fact, down by as much as 26 per cent. JOHN SUMMERS did better to avoid anything more than an 8 per cent. decline in group profits, but SOUTH DO HAM, viewing the future pessimistically, has cut its dividend by 2 per cent. to 10 per cent. THOMAS FIRTH AND JOHN BROWN has produced the best results—with profits almost maintained —and this can be attributed to the fact that it is a specialist—manufacturing heavy castings and forgings, alloy steel and stainless steels. The cover for the 121 per cent. maintained dividend is as high at 3.2. If credit is not taken for the investment allowances it will be found that the cover of other steel dividends is now only moderate—around one and a half to two. This fact is a reminder that steel shares should not be bought simply for their high yields. Indeed, 6.3 per cent. and 6.4 per cent. on United and Colvilles may be regarded as thin on the re' duced cover. There seems to be no early prospect of a recovery in the steel industry. If de' stocking among consumers is maintained for the next two quarters the industry will only operate at even less than 75 per cent. of capacity. Perhaps the best poliCy at this late hour is to go on, holding the well-covered steel shares, but to shed those dependent on the steel industry, such 35 DAVY-ASHMORE and HEAD WRIGHTSON, the yields on which are only 4.4 per cent. and 4.1 per cent' respectively.