Finance
The Railway Half-Year
IN The Spectator of July nth, when dealing with the Home Railway outlook, and especially with the increase in gross revenues in relation to the demand on the part of railway employees for a restoration of the cuts in salaries, I said : "It is almost certain that when the half- yearly statements are issued it will be shown that as against this increase in gross receipts there has been a considerable expansion in working expenditure." The half-yearly statements have now been issued and the results may be allowed to speak for themselves.
L.M. AND S. STATEMENT.
In the case of the London Midland and Scottish there was an increase in gross receipts of £1,900,000, but nearly one-half has been swallowed up by increased expenditure. Nor, so far as can be judged, does this mean any reaction from the practice of wise economies, but rather the actual employment of more people or of making payment for longer hours owing to the greater volume of traffic handled. Thus, out of a total increase of £900,000 in expenditure for the first six months of the year, £600,000 came under the head of salaries and wages and 5:300,000 under the head of other expen- diture. It will be seen, therefore, that for the first half of the year the L.M. and S. Railway was able to secure a net increase of £1,000,000 in the revenue, but be it noted that so far from that increase enabling the Company even to meet the interest on its prior charge stocks, the Directors are only able to pay 1 per cent. for the half- year on the 5 per cent. Redeemable Preference and 1f per cent, on. the 4 per cent. Preference stock, while the 4 per cent. Preference of 1928 goes without any interest at all. It is quite true that if the improvement con- tinues during the second half of the year there is a reasonable prospect of the full interest being paid on the First 4 per cent. Preference stock and on the 5 per cent. Redeemable Preference, while there is just an odd chance that something may be available for the 4 per cent. Preference of 1923, but there is little chance of anything on the Ordinary stock.
THE SOUTHERN RESULTS.
On the same day that the results were announced of the London Midland and Scottish Railway Company, the Southern Railway announced, that while Paying the full dividends for the half-year on all Guaranteed and Preference stocks no interim payment was being made on the Preferred Ordinary. Moreover, in the case of the Southern Company, the rise in expenditure in proportion to gross revenue was greater than in the case of the London Midland and Scottish. The gross increase in passenger revenue was £125,000 and in goods £155,000 making an aggregate increase of £280,000. Expenditure rose by no less than £190,000 mainly owing to larger payments in respect of wages and salaries, while net receipts from other activities were the same, so that the net revenue showed an increase of only £90,000. The statement was regarded by the market as disappointing, and prices for some of the stocks were promptly lowered.
G.W.R. FIGURES.
On the following day came the announcement by the Great Western and North Eastern Railways. As regards -the former Company it will be'remembered that while it is the only Company which has maintained a dividend on its Ordinary stocks, the dividend has only been possible through drawing on reserves, and on the present occasion the Directors are merely repeating the policy of a year ago in paying f per cent, upon the Ordinary stock for the half-year, the statement intimating that such payment is made possible by a transfer from the free reserves. The gross receipts for the half-year including the ancillary businesses were £593,000 over the first half of 1984. Expenditure increased by £261,000 and the increase in net revenue from all sources including interest was 1870,000. This is quite a satisfactory result from the standpoint of comparison with a year ago, but it scarcely promises that the year will end by the Company actually earning the full 8 per cent. (which has been paid in recent years) on its Ordinary stock. L. AND N.E.R.
In the case of the London and North Eastern Railway the increase in gross revenue from all sources for the first half of the year was £1,840,000 or nearly as much as the London Midland and Scottish. On the other hand the estimated increase in expenditure for the half year is no less than £1,154,000, this leaving an addition to the net receipts of £686,000. At the same time the statement is a good one, as it appears that a year ago the payment of the full dividends -for the half-year on the 4 per cent. First Preference and Second Guaranteed stocks required a temporary transfer from general reserve of no less than £600,000, so it looks as though the current half-year was starting with cvzr E80,000 of net revenue in hand towards payment of dividend on the First Preference stock, whereas last year there was a deficit of £600,000 to be made good from the revenue of the second half of the year before the Second Guaranteed stock dividend was fully covered.
IS TRADE RE-ACTING?
On the whole, therefore, the railway results for the first half of the current year are about as satisfactory as had been expected, although, as already stated, they fulfil my expectation of the gross increase in earnings having been accompanied by a considerable expansion in working expenditure. It is quite clear, however, that so far as the second half of the current year is concerned much must depend upon whether the improvement in trade is maintained. We seem to have arrived at the point when opinion is about equally divided as to whether we can go much further in the way of internal trade improvement without a material expansion in inter- national trade as- a whole. Only a few days ago the President of the Board of Trade, while reporting favour- ably upon the improvement so far established in our home trade, suggested that until there was an expansion in our exports and in international trade we might for the moment have reached saturation point in the matter of trade expansion. This remark by Mr. Runciman makes it difficult for us not to be impressed by a similarity between the effect of tariff wars or at all events tariff competitions and the competition in armaments. In both cases the spirit of ultra-nationalism tends to cramp any movement in the direction of international co- operation, and this in its turn tends to an ever-increasing restriction of international trade. Whether the adoption of tariffs by this country, and, now, the adoption of a policy of increased measures for national defence, may ultimately have the effect of breaking down barriers in other directions, time alone can show.
ARTHUR W. KIDDY.
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