Bright spot
JOHN BULL
Share prices have been falling sharply again, both in London and New York. Some measure of how far the crisis enveloping los is responsible was apparent last Thursday, when the London market turned right round and rose five points in an hour's dealing on the rumour, subsequently denied, that Rothschilds were going to revive their take- over for the group. All the same, the past few days have not been without valuable in- formation on tos's affairs. And the news is mildly reassuring. The snowball runs a little more slowly than I thought it would.
In the first three weeks of May $45 million was pulled out of los by worried investors. That compares with a net inflow of $54
million in the first four months of 1970. As I write, daily net withdrawals have dropped from about $5 million to $6 million to $1 to $2 million. More to the point, there are no net redemptions in this country_ More people are putting money into the Dover Plan, either by way of regular premium payments or by starting new plans, than are asking for their money back. Given the way share prices are behaving and the long delay in finding a solution for Los's difficulties, these figures are remarkably good.
Equally interesting is the way the Dover Plan managers in this country have sold their holdings in two of the more suspect los funds—Fund of Funds Limited and los Ven- ture Fund (International) mv. It needed some courage to vote no confidence in two of your own funds, but the los London management has done just that. It has gone further. It has repaid a £1.97 million loan from ios Ltd and a £765,000 from another los associate. The result is that about £25 million of Dover Plan funds, some 45 per cent of the total. are now in cash. The Dover Plan is now as divorced from the difficulties of its group as it is possible to be.
Some light has also been shed on two other important aspects of the los crisis—how far below expectations Los's profits for 1969 and the first quarter of this year are, and exactly what Mr King of King Resources, the company which hopes to resuscitate IOS and -which has signed an agreement to that effect, intends. It seems that tos's holding in Commonwealth United, an American conglomerate which got into trouble, has been written down to nothing some time ago (at a cost of $13 million), though there are still some short-term loans outstanding. And according to some reports of Mr King's press conference in New York, tos's 1969 figures will be ahead of those for 1968.
As for Mr King's plans, the only part he will talk about is how he intends to cut tos's expenses by reducing staff by 40 to 45 per cent. As for names of banks and other finan- cial institutions which might be in the rescue party, no news yet. So the los crisis rumbles on, but the abyss seems to be a little further away than we thought.
Burton Group, the men's tailoring chain, is worth watching for possible investment op- portunities, but the latest figures were somewhat disappointing. The clearance of stocks after Christmas involved a £500.000 shortfall against budget. The clothing in- dustry, like every other sector, has ex- perienced sporadic strikes, and rising costs have not been completely passed on to the customer. But according to stockbrokers Myers and Co, who have been looking into the situation, trading conditions in the last six weeks have been very good and a con- tinuation for the next three months at this rate could bring the level almost up to last year's second half which was an unusually good period. Apparently the company's policy of trading up has been successful. Customers have been choosing the more expensive cloths on which margins are better. - But the major point about Burton is that it has a new management which is taking the current year as one for fact-finding and ex- periment. Next year we could see some major policy decisions and if they are right the group's profits could expand strongly. At 24s 3d the 'A' shares are selling at about thirteen times earnings and they have an asset back- ing of 42s 6d mostly prime high street properties.
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