28 MARCH 1970, Page 23


Hymn of hmm


My method of judging the health of Welsh industry is to look at the progress—or lack of progress--recorded by Wales's great com- panies. One's reaction is not, I am afraid, one of great enthusiasm—or of great despair. It is really the doctor's 'hmm' when he looks at a patient who is not in the best of form. Take, first, the Aberdare Group, whose headquarters are in Glamorgan. Aberdare makes and sells electrical equipment, pro- ducts such as switchgear which go into

power stations and transmission systems and transformers which go to the same type of customer. Well, we had some warning of the dreadful results which the company an- nounced at the end of last week. Sir Alfred Nicholas, the chairman, wrote in his last an- nual report that 'the down-turn of business in the second half of 1968 has continued into the early part of 1969 and for this reason 1969 will be another difficult year . . . I am confident that 1970 and onwards will be successful years'.

In the event, the result is a loss of around £800,000 for the year to October 1969. There is no dividend, And, what is most interesting, merchant bankers Robert Fleming and the Prudential Assurance company are coming to the rescue. They are to underwrite (in other words guarantee) an issue of £750,000 5 per cent convertible. There are to be more management changes. The board says that 'trading prospects are showing an im- provement with a satisfactory order book which will produce higher profits'. Results for the current year are expected to show a sharply reduced loss. All the same, I should not advise shareholders to take up this rights issue. The 5 per cent coupon is most unat- tractive. Enough of their money is at stake already. Of course the electrical market has been very difficult for some months now, but has Aberdare's sudden burst of merger mania—when it acquired four companies in twelve months—anything to do with present misfortunes?

On the other hand, the Hodge Group, the instalment credit, banking, department store and motor retailing group built up by Mr Julian Hodge, is in good form. It has had its up and downs, indeed some of the downs were particularly unnerving, but backed now by the Chartered Bank, the Hodge Group (headquarters in Cardiff) is on a steady course. Speaking at the annual meeting in Cardiff at the beginning of the month Julian Hodge remarked that 'in common with other financial groups, we have found the going hard in some places, the flow of money sometimes uncertain and its costs exorbitant . . . but our position has been eased by the great help we have had from the Chartered Bank and the added status that our association with them has given us'. There Mr Hodge explains why it is so important for a financial group to get the right backing. In the City the name of the game is the name. Some names are better than others. Some major pension funds have done badly. But the minute that Hodge Group secured the backing of the Chartered Bank (as a major shareholder), it moved up into a higher league.

Julian Hodge is credited with a rather strong dislike of London. Certainly the group is run entirely from Cardiff. Has this brought any disadvantages? My guess is that it has done so only in one area—unit trusts (now sold). Your local roots can only pro- duce a limited number of local winners. Otherwise the operation has to be conducted through London. The City pays sky-high prices for good analysts and dealers, so Cardiff can hardly compete. And if you use London stockbrokers, there is bound to be a loss of rapport. In fact earlier this year Hodge sold his unit trusts to First Finsbury, which is a City based off-shoot of Vehicle and General. It is a good deal. The con- sideration is £1.3 million and there are big gains to come from association between the two groups.

I turn finally to a very Welsh activity—the recovery of coal from coal tips, a business in which L. Ryan Holdings has been expert and profitable for years. Unfortunately the ter- rible Aberfan disaster in October 1966 held back activities because the coal board instituted a considerable retrenchment in the operation of the tips. Profits dropped and as recently as last November the interim divi- dend was cut although pre-tax profits were expected to be maintained. However the company appears to be in good heart. It is establishing itself in Belgium where there are substantial tonnages of tip material to be washed and screened. The results in Belgium are quite as good as those in South Wales. All the same, until the company's dividend prospects are a little clearer, investors should be cautious.

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