By LOTHBURY A NOTHER upswing in pre-tax profits and net profit from Gallahers for 1963, at £17.618 million and £8.256 million respectively: a very creditable result, but 1964 may prove to be a sterner test. Gallahers, makers of :Senior Service' and other brands, are now well established in the tipped field—the 'Cadet' tipped is a winner. The company has established Gallaher International, which is responsible for the group's exports and overseas sales, with special emphasis on Europe. Through this sub- sidiary the 'Edinburgh King Size Filter' has been launched in Australia. In time this expansion will pay off. In the meantime the 10s. shares at 23s. 6d. on the maintained 171 per cent dividend yielding 7.4 per cent, should continue to prove an excellent income stock.
The outstanding profit record of Rugby Portland Cement continues, for 1963 was the eighteenth successive year when higher profits were made. Pre-tax profits amounted to £2.655 million and the net surplus of £1.188 million compares with £889,000 previously. The way ahead still looks bright, for by the end of this year the reorganisation of the Eastwood Group should be finished and the reconstruction of the Barrington works completed. There is every good reason for Sir Halford Reddish's (the chairman) optimism for 1964 and 1965, during which time I would expect higher profits and possibly another lift in the dividend, which for 1963 was raised to 121- per cent from 10 per cent. Those who have followed the fortunes of this fine company should continue to do so. The 5s. ordinary shares at 23s. 9d. yield 2.6 per cent.
Considerably reduced profits for 1963 were expected from Babcock and Wilcox, the boiler makers and engineers. These have come about through losses on power station contracts and from the Dewrance and Australian companies. The company has finished its Sizewell nuclear power contract for big steel pressure vessels and has now secured the Wylfa contract for the biggest-ever atomic power station. From the chairman's statement on page 642 of last week's issue, it will be seen that in order to secure some large contracts it has been necessary to work on a net profit as low as 21- per cent. This slender margin can be—and has been—easily upset by labour troubles. Better profits can be hoped for In 1965, but at the moment the £1 shares at 34s. 3d. on the 9 per cent dividend look fully valued.
Seafield Amalgamated Rubber has, for the year ended September 30, 1963, maintained its
profits by increasing its rubber production and reducing costs. Pre-tax profits were £958,000 and the dividend was increased from 25 per cent to 27f per cent. This high-class company also produces oil palm, the price of which is rising and so will to some extent offset the falling profit that may occur from the output of rubber. The 2s. shares at 3s. 6d. are giving a high yield of 14.9 per cent, which will be acceptable to some investors who are able to take a risk in this class of security.