Finance
The L.M. and S. Meeting
A FURTHER rise in the Prior Charge stocks of English Railways, to which I have on several occasions drawn attention in these columns, has been a feature of the past week. To some extent the movement has been a natural . accompaniment to the continued, advance in British :Funds and kindred stocks. Those securities have now risen to a height giving such a meagre yield of interest that investors are turning eagerly in other directions where with reasonable security a return, say, of 4 per Cent. can be obtained. --There is little doubt, however, that this rise in Preference and Debenture stocks of English Railways received a further stimulus from the, meeting of the London, Midland and Scottish Railway which was held on Friday in last week. It was not that Sir Josiah Stamp, the chairinan, indulged in any outburst of optimism for, on the contrary, he was exceedingly cautious in his reference to the future, and several times emphasized the point that the fine increase which is taking place in traffic receipts during the current half-year must almost inevitably be accom- panied by an increase in expenditure.
THE USES OF ADVERSITY.
What, however, impressed stockholders of the L.M.S. Railway and, indeed, that still larger section of the public which had the opportunity of reading Sir Josiah's speech 'in the newspapers, was the . evidence which it afforded of the grip which the management now has over every detail of this great organization. It is possible, of course, that even before Sir Josiah Stamp joined the company there was an efficient handling of affairs, . but it was left to the present chairman of the company to place the details of the organization before the shareholders and before the public in a manner which it was possible to comprehend. Moreover, there is *. also little doubt that the very fact of the severe depression through which the railroad industry has passed . has been largely • responsible for the discovery by the management of those directions where increased efficiency and large economies were necessary. " Sweet are the uses of adversity."
A REMARKABLE RECOVERY.
During the first half of the year 1938 the gross earnings of the L.M. & S. Railway fell by no less than £1,700,000, but such were the economies during those six months that 'the decline in the net revenue was only £300,000. During the second half of the year, howeVer, there was a 'reMarkable recovery so that for the final' six months the traffic returns showed an increase of no. less than 11,390,000, and as the final outcome of the year there was an actual increase in net revenue of about £808,000, Which, together with the net economies for the year, resulted in a total increase of reyenue .of 11;375,000. This can only be described as a very fine performance.
. LIMIT TO ECONOMIES.
In considering these economies during the past year it must be remembered that they follow upon remarkable savings over a-period-of six years. During' these years the expenditure of the company has actually been reduced from £70,000,000 to 155,000,000, and while, of course, by reason of reduced traffic some of these economies have necessarily had to take the form of reduced staffs, Most of the economies have been- in the nature of a stoppage of waste, and the securing of greater efficiency. IFr'many direetiOns, too, including . locomotive power, the. company has owed. very much to the results of scientific research. In considering the future, however, it is not surprising that Sir Josiah. Stamp should have diven a reminder AO; shareholders of the fact that there must be a limit to certain forms of economies. Thus, if the present promise is fulfilled of larger receipts both from passengers and goods, it is evident that increased expenditure, especially by reason of an increased staff, must necessarily be incurred. And, further, the chairman of the L.M. and S. reminded shareholders that something like 90 per cent. of the company's expenditure was concerned with wages and the costs of materials, matters which arc beyond the control of the management.
At the same time, Sir Josiah added, " you may rest assured, however, that the large economies arising out of reorganization and re-equipment will be of a permanent nature." This statement will give all the greater assur- ance by reason of the systematic manner in which the economies in the past have been effected. Some two years ago Sir "Josiah Stamp introduced what he has described as the " budget system " to control expenditure, and it appears that for the past year the actual expendi- ture finally worked out at 99.6 per cent, of the budget fixed early in the year. . Moreover, the report and accounts of the company show how this matter of economy and organization has been carried out in: the Minutest detail.
THE OUTLOOK.
Concerning the general outlook, Sir Josiah Stamp May be said to have tempered-optimism with caution. In fact, if the speech of the chairman of this great Railway undertaking were to be compared with the addresses recently delivered by the chairmen of the joint stock banks it would be found that there was one great point of similarity between them, namely, that while the moderate improvement in home trade was duly recog- nized, there was also a clear recognition of the fact that without a great improvement in international trade the revival in home trade cannot go very far. We arc still, said Sir Josiah, " a nation whose productive capacity • and direction have been framed for a con- siderable proportion of export trade, and we are ill at ease in the dress of new nationalism, to live as a self-contained unit, which the march of world events has more or less forced us to wear." Ile then went on to say how little. the people in the South of England realized the terrible conditions of depression which for so long have prevailed in the North. In other words, international affairs continue to be of immediate practical importance to industry in this country,. and Sir Josiah summed up the situation very well when he said, " The outlook for international trade is too uncertain- for confidence in the domestic situation to be unqualified by doubts." Nor do I sec anything in these cautious remarks to justify pessimism. Facts, unpleasant as well as pleasant, have to be faced and I count it as something to the good that there ,should he such a keen realization amongst the leaders of finance and industry that for this country, at all events, a policy of extreme nationalism is an- tagonistic to our own interests as well as to those of
Previous page
