FINANCE AND INVESTMENT
By CUSTOS STEEL DIVIDEND POLICY
It is apparent from the profits and dividends just announced by the Lancashire Steel Corporation and Dorman, Long that distribu- tion policy in the heavy industries is at present .distinctly conserva- tive. Although both these companies have succeeded in 'increasing their net earnings after taxation, neither has seen fit to raise its ordinary dividend. For the year to October 31st, 1944, Lancashire Steel is again paying 7 per cent., while the ordinary dividend of Dorman, Long for the year to September 30th, 1944, is maintained at 8 per cent. Both undertakings have been through lean times in the past and nobody will blame them for taking advantage of present conditions to strengthen their internal finances and build up reserves. In view of the enormous banked-up demand for capital equipment which will have to be satisfied in the post-war years the prospects for iron and steel manufacturers look promising, but there are still uncertainties arising out of high costs, competitive imports and export market problems.
, So far as investors are concerned, the ordinary shares of the leading companies, which can now be bought to yield anything between 5-4- per cent. and 7 per cent., may be regarded as good industrial holdings. Moreover, there is an interesting implication in the grow- ing strength of the Lancashire Steel Corporation for shareholders in Pearson and Knowles. As I have previously pointed out, Pearson and Knowles is now a holding company awaiting liquidation. Its main investment is a large shareholding in Lancashire Steel ordi- naries and its subsidiary investment is a preference and ordinary shareholding in the Wigan Coal Corporation. I estimate that the value of these holdings is now more than sufficient to pay off Pearson and Knowles income debenture and to redeem the three classes of preference capital at their full par value. When this will be done is anybody's guess, since everything depends on the-marketing of the Lancashire Steel and Wigan Coal shareholdings. I shall be surprised if these large investments are sold until Stock Exchange conditions have become much freer than they are now. Meantime, Pearson and Knowles 6s. 8d. third preferences are quoted around 4s. 9d. A buyer who is prepared to be patient should in due course receive the par value.
LONDON STORES RESULTS
Preliminary figures for the year to January 31st, 1945, which are now being- announced by the London stores undertakings, suggest that last year's trading, experience was reasonably satisfactory. William Whiteley has resumed ordinary dividends, while although Harrods are merely maintaining their ordinary, dividend at 8' per cent., the net profit has increased from £7o2,181 to £733,341. During the period of the flying bomb activity sales fell off, but there was a strong recovery in the autumn, and Christmas trade was on a high level. As every shopper knows, profit margins are much wider than before the war, the stores now enjoying all the advantages of a seller's market. The post-war outlook for the stores companies looks bright, since there will be no transition problems and demand is likely to remain well in excess of available supplies for several years. Since I recommended the Lit it's. per cent. preferred shares of Selfridge (Holdings) some months ago the price has risen from i6s. to 25s. They still appear, however' to be a promising lock-up speculation. Arrears of dividend date back to- September 3oth, 1938, and rank behind six years' arrears of dividend on the 6 per vent, first preference stock units,-now quoted at 30s.
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