SKINFLINT'S CITY DIARY

Pilkingtons has somehow charmed us into believing that it is a beneficial near-mono-, poly, a sort of business utopia. Whether it is the saintly figure of Lord Pilkington or possibly the attraction of so many of their products, there is something about Pilking- tons which seems to make it the industrial equivalent of that socialist High Street ideal of the mixed economy, Marks and Spencer. At last Pilkingtons are to become a public company and I wish their offer for sale this week every success. Particularly welcome are their high quality accounting practices which would, I fear, bring a sneer from most of our go-go boys in the City.

Pilkington's class

For example, Pilkingtons do not capitalise but charge against profits the cost of re- search and development. They also treat the lump sums that they receive from abroad in connection with their float glass process as capital and do not scramble them to con- fuse us as recurring income. Further indica- tion of their properly conservative accounting practices is depreciation charges which take into account replacement cost and the ex- pense of, premature obsolesence.

Last week I mentioned Slater-Walker Securities' sale of Dollond & Aitchison Ltd the spectacle makers to Gallahers for £10.2 million cash. It depends on where you start from or where you are trying to go as to who got the best bargain, but Mr Clifford Brown, chairman of Clifford Brown Ltd, a rival firm of opticians, told me not long ago that Dollond & Aitchison was an excellent, well-run business and I am inclined to believe that Gallahers will be proved not to have made a mistake in paying what seems like so much for goodwill.

Nice guy

Jim Slater is, I am told, the nicest guy in the world and Slater-Walker will no doubt say that the £10.2 million cash will become more dynamic in their hands than its value wrapped up in a slow-growing business, however sound. I don't believe it and I shall be surprised if a lot of the £10.2 million is not called income by Slater-Walker rather than be treated as a capital receipt. As in- come it will pay corporation tax and help towards the high dividend necessary to keep Slater-Walker's price-earnings ratio as high as possible, but this still does not meet Lord Pilkington's, my, or any other prudent person's idea of quality earnings.

London Weekend Television

I don't know if I am allowed to write about London Weekend Television as the SPECTATOR has a few profitless shares in this company but I see that the annual bleat has come from ex-Socialist ex-Conservative Mr Aldan Crawley. He goes on as might be expected about the advertising levy which is, as everyone knows, a ridiculously arbitrary imposition which will presumably continue until Mr Crawley, the Independent

Television Authority or the Chancellor of the Exchequer discovers something fairer— surely even Mr Crawley does not expect to be given a King James-like monopoly for weekend television advertising in the London area for free.

Old friends

London Weekend Television lost £67,000, but paid Mr Crawley and his eighteen co- directors £109,182—which seems to show that parting with a few old friends would at least get them out of the red but I fear that there will be resistance to the reform. Sir Arnold Weinstock, who as a precaution sold his shares to Mr Rupert Murdoch of the News of the World group, asked Sir Donald Stokes, one of the myriad of direc- tors that Mr Aidan Crawley feels necessary, if he would consider forgoing his director's fee of something like £1,000 as he was then doing nicely at British Leyland Motor Cor- poration. No—Sir Donald's annual meeting or two at Savile Row was worth his £1,000 and this he must have. Perhaps now he is one of the directors who I see have agreed to waive their fees.

Creepy Crawley

London Weekend Television has not pros- pered under Mr Adrian Crawley and he and most of the rest of the Board should creep and crawl away, leaving Rupert Murdoch in charge, to engage, let us say, Larry Lamb of the Sun to try to extricate them from the mess they are in; though I regret that Mr Murdoch, if he is to be the saviour, will find it particularly difficult to reduce the cost of staff salaries (1,102 souls earning between them £2.56 million), which must, at an average of £2,320, be something like the highest in any business in the land, especially when so many of the staff must be relatively lowly-paid commissionaires, messengers,

chauffeurs, secretaries, office boys and the like. There really seems only one man who knows how to run a television network put- ting on programmes that most of us actually want to see and at the same time building up a future for his shareholders with original material for overseas licensing—Sir Lew Grade. But he is tied up just now.

Charitable trusts

Perhaps like me you think of charitable trusts as a moral refuge for greedy old men penitently expiating a lifetime of sharp practice in the City of London or in the High Streets of Britain by founding art galleries in Bognor or helping some sporting organisation that brings them near, for how- ever brief a time, to some member of the Royal Family.

Whatever the motive, I have always thought that a degree of self-sacrifice was needed to lose even a small part of the lar- gest fortune. I now find that far from de- pleting a fortune it is a way of keeping everything you've got and a bit more—in addition to keeping the respect of the United Synagogue, the Pope or the Church Missionary Society according to taste.

Tiny grandchild

With the help of one of the better firms of solicitors and accountants, you set up a charitable trust with trustees of whom you approve and aims which you needn't worry too much about as it will be a long time before the beneficiaries get more than a dribble of help. It is a nice touch to give the charity a suitable name such as your mother's or tiny grandchild's. A relatively small sum by deed of gift, and the charity and you are away.

The charitable trust caper depends on own- ing a good business with some quality of earnings and also a congenial lifestyle with which you do not want to part through a flotation.

Oil slick from seabirds

Let us say that your business makes a good steady and recurring £100,000 per annum pre-tax and is worth, in the way these things are, say £1,000,000 if it was thrown on to the stock market. Just because a charit- able trust is set up to remove oil slick from seabirds it does not mean that it may only have assets that have reached it by way of gift. It is able, for instance, to buy busi- nesses as well as stocks and shares and may, quite properly borrow from its bank in order to buy what it considers to be a sound investment.

The procedure is that you sell your business to the charitable trust for a notional (since they have no cash) £1,000,000, agreeing to take payment over ten years at the rate of £100,000 per annum coming of course from the income they get from this new acquisition which is not subject to corporation tax or income tax because it is a properly con- stituted tax-free charity. You naturally con- tinue as Managing_ Director at your old salary and everything remains from a com- mercial point of view very much as it was before. The scheme is so good that I am surprised that some of the more venturesome developers of conglomerates do not turn their master companies into charitable trusts so that they are spared the trouble of main- taining a high share price at the top of their pyramid. The subsidiaries of course may continue as public companies printing shares as they are needed for new acquisitions.