1 MARCH 1957, Page 30

COMPANY NOTES

By CUSTOS

sold off to I would advise holders to take their profits. The huge borrowings of the Bowater group make me disinclined to join the public rush. Including the loans of the American subsidiary, I calculate that about half the parent company's trading profit will be absorbed by fixed prior charges. The next big issue is to be the denational- isation of the giant STEEL COMPANY OF WALES, which is to offer forty million £1 shares at par—, the largest equity share issue ever floated in the City and probably the most unpopular. The insur- ance companies will, no doubt, be 'requested' to subscribe. The issue will damp down the rise in industrial shares for a long time, It has already caused a sharp fall in other steel shares, some of which are looking cheap.

BRITISH AMERICAN TOBACCO has again justified its place in most investment portfolios by raising the dividend 21 per cent. 'to 30 per cent. tax free' and declaring a one-for-three scrip bonus. The shares have been a rising market lately and at 59s, yield under 6 per cent. on the existing divi- dend of 20 per cent. tax free covered over two and 'a half times. At first sight the profits would appear to be down—the net profit after higher tax provisions was £214 million adainst £24 million—but owing to the Middle East upheaval certain subsidiaries have not been taken into the consolidated account and the investment in them has been written off out of reserves and un- divided profit, which will be down by £51 million. Investors will probably want to hold on to their BAT shares, partly because it is reasonable to expect a slightly higher distribution on the in- creased capital, partly because there may be a tax concession in the April Budget coming to companies trading overseas.•Whether they should also hold on to their IMPERIAL TOBACCO shares is a more difficult question to answer. The full accounts confirm the warning in the preliminary statement that turnover in weight fell slightly owing to intensified competition and more diffi- cult trading conditions. l'his probably implies that 'Senior Service' is still cutting into the sales of 'Players.' But it must not be forgotten that Imperial have a share interest in GALLAHER TOBACCO and also a very large interest in BAT. In fact, the income from Imperial trade invest- ments.in the year to October last amounted to 34 per cent. of their total trading. profit. Dear money makes it a difficult period for such a large borrOwer as Imperial (bank overdrafts, etc., have increased by £3 million to .E371 million) and as £10 million of 3+ per cent. notes fall due this autumn new borrowing is not impossible. Im- perial Tobacco shares have fallen from a high of 62s. 6d. last year to 45s. 3d., at which the yield on the existing dividend of 21 per cent., covered nearly one and a half times, is 9+ per cent. The market view is that the fall has dis- counted the increased risk to the dividend, but the shares may drift until the question of new finance is cleared up.

The long decline in gold shares goes on. It

Is strange that the mining finance houses do not support the market, but the continental buying from Paris and Zurich, which used to help, has been diverted to Canadian oil shares and other -commodity shares. But their turn will come in due course. Meanwhile, some of the OFS new mines are now giving satisfactory yields on dividends. .