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11-mi the exception of the London and North Eastern, whose result& will have been announced before the end of this week, the trunk railways of the United kingdom -have now declared their dividends for the past year, and two of the companies, the Great Western and the Southern,. have also published their Reports. In all three instances—including the. L.M. & S.—the results may be said to have been up to expectations, and, indeed, in the case of the London Midland and Scottish the announcement of the full dividend on the 4 per cent. Preference of 1923 equalled the very best hopes. Never- theless, the fact remains that in most instances current quotations of railway stocks are a little lower than at the beginning of this month, when there were merely expectations, and no results had then been announced.
Before glancing at the effect of the dividend announce- ments as a whole_ upon the prices of securities, it may be well, perhaps, to summarise briefly the actual results of the Southern, the L.M. & S. and the Great Western. The Southern Railway announcement was made on February 10th, when a balance dividend -was declared of 4 per cent., making 5 per cent., or a full rate for the year on the Preferred Ordinary. The Directors stated that the gross receipts for 1935 were higher by £364,000, while the net revenue increased by £27'2,000. In arriving at this net revenue, credit was taken for a saving of £250,000 in respect of rates and contributions. Conse- quently it would seem that the net revenue from the railway working and other sources was only £22,000 above the previous year. This, however, was not an unfavourable showing having "regard to the anticipated increase in working expenses.
L.M. & S.
A few days later came the declarations by the L.M. & S. and the-Great Western companies. The former company announced the full 4 per cent. dividend on the Preference Stock of 1928, carrying forward £185,000 against _only £21,000 a year agO. The Directors reported an increase of £1,225,000 in gross revenue and an increase of only £119,000 in working expenses, thus showing a gain iii net revenue of over £1,000,000. Working expenses included an additional £450,000 in respect of salaries and wages, but against that amount the charge for rates relief was reduced by £885,000; being 50 per cent. of the provisional charge for 1935.
G.W.R.
In the case of the Great Western Railway the gross revenues rose by £508,000, but there Was a rise in gross expenditure of £506,000, and the net revenue from all sources showed an increase of £39,560. The maintenance of the 3 per cent. dividend, therefore, rendered necessary the bringing in of £122,990 from profits realised on sales of investments and £710,000 from the Contingency Fund. In the previous year the Company brought in £323,948 from profits on investments and £550,000 from Contingency Fund, so that, although the Year's results were slightly better, a larger draft from the Contingency Fund was necessary. On the other hand, the Contingency Fund has been credited with certain specific Reserves, mainly for Income Tax, which have been released so that the Fund now standS at £4515,000, a reduction of only £268,000. Moreover, in considering the results for the Great Western Railway, there is no doubt that a big allowance has to be made for- the extent to which the industry of South Wales must have been hit by the practical cessation of coal shipments to Italy.
INVESTMENT 'CONSIDERATIONS.
So much for the results of the past year, and there seems no reason to doubt that the figures of -the London and North Eastern will be fairly encouraging. The chief relief has come, of course, from the revised rating charges, though precise figures with regard to these gains can hardly be stated at the moment. In practically all cases, however, there has-been an increase in profits, and in the case of the Southern and the London Midland and Scottish increased dividends on Prior Charge stocks have become possible. Nevertheless, as I have already stated, "prices are on the whole a- little lower than at the beginning of the month, in spite of increased profits and increased dividends On some of the Prior Charge issues, and for this I think three reasons may be given. The first is the obiioni one that the market has suffered from realisations on the part of thOse who had. bought in advance of results-; the second is that holders are in constant apprehensions .with regard to increased working expenses, and the third reason, so far as the Prior Charge Stocks: are concerned, is to be found in the fact that gilt-edged securities -have weakened slightly during the.past year. For it must be remem- bered that Prior Charge stocks of English- Railways owed their first recovery to the fact that their yields begin to look attractive when compared with those afforded by absolute trustee stocks. Nevertheless, I cannot help thinking that the yields on some of the Prior Charge stocks are fairly attractive, remembering what scant yields are obtainable from British Funds. Southern Railway 5 per cent. Preference, for example, which through the operation of the " Chancery " qualifica- tion allows trustees to "invest in it, gives at the present price, ex the dividend, a yield of. about £4 3s. L.M. & S. 4 per cent. Preference of 1923, which, of course, has now only just resumed payment and is, therefore, somewhat specu- lative, gives a yield of £5 18s. 6d., but L.M. & S. 4 per cent. " best " Pref., as it sometimes called, also gives a yield of £4 13s. ed., which, even allowing for the fact that it is not a trustee stock, is a fairly good yield as things go nowadays, while L.M. & S. 4 per cent. Debenture Stock, giving a yield of practically 3f per cent., might be regarded as a gilt-edged security. Unless, therefore, British Fundi and .kindrred stocks should receive some material set-back in the near future, I cannot help thinking. that some British Railway Prior Charge stocks offer. fair 'chances to the investor.
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