FINANCE AND INVESTMENT
By CUSTOS How Stock Exchange sentiment, which plays an important part in fixing security values, has changed in the past few weeks is now being illustrated in the reaction of markets to good news. Resound- ing communiqués from Cairo and Teheran have failed completely to stimulate fresh buying, and so has a steady stream of dividend increases. While there have been modest rises in some of the shares concerned, one would have thought that higher dividends announced by a list of companies which includes Carreras, Electric and Musical Industries, Crompton Parkinson, Aerated Bread, Associated News- papers, Roneo, Alvis, and .many others, would have been sufficient to put buyers on the feed again.
CARRERAS' PROFITS UP If evidence were needed of the striking prosperity of the tobacco industry in war conditions it is afforded by the latest results of Carreras, Limited. For the year to October 31st trading profits have jumped from £609,399 to £792,279. These figures have been struck after providing for depreciation and setting aside £2,837,695, against £2,459,330 for taxation. It thus appears that gross profits rose by about £570,000, and easily established a new record level. With a final of 17+ per cent, the board is bringing up the total distribution on the ordinary capital to 30 per cent., against 27+ per I cent, in the preceding year. A sum of £ioo,000, against nil, goes to contingencies, and £5o,000, against £ro,000, to staff fund, while the carry-forward is increased by £2o,00o to £326,725. From these results it is plain that war-time influences on demand and on costs of distribution, including advertising, have more than • offset war- time difficulties in the tobacco trade in relation to profit-earning capacity. On the strength of the higher dividend, Carreras £1 " A " ordinaries have risen from £6A to £618-, while the 2s. 60. " B " shares are up from 16s. 9d. to 17s. 3d. At these levels the yields offered are about 4-1 per cent. The shares are worth holding.
COTTON SPINNERS' PLAN
Improved conditions in the Lancashire cotton-spinning industry are enabling many companies which passed through lean times before the war to tidy up their financial position, and get on to a sounder basis. Among these is Crosses and Winkworth Consolidated Mills, which has called special meetings for December 30th to consider a capital reorganisation plan. In this case the main problem was to deal with the arrears of interest dating back to March 1st, 1932, on the 6 per cent. "Heaton" debenture stock. These arrears amounted to £928,616 gross, or £464,308 net, i.e., after deducting income-tax at ' As would be expected, the existing preference capital is not merely to be written down in nominal value, but is to be exchanged for ordinary stock, holders of the preferences being left with rather less than one-third of the nominal value of their existing holdings. Ordinary shareholders will be left with stock to a nominal value of one-quarter of their existing holdings. Thus, if the scheme is approved, the whole of the debenture stock and the arrears of interest will have been extinguished without depleting cash resources, while the company's issued share capital will consist of £1,396,215 in 6 per cent, redeemable preference stock and £822,892 in ordinary stock. , From the investment standpoint the best value for money is to be had in the "Heaton" Debentures, quoted around £120. If, as seems a fair assumption, the 6 per cent, preference dividend is covered with a fair margin, the £too of 6 per cent, preference stock allotted should be worth at least £105, the equivalent of ms. for the £i share, while the new ordinary £i units should command 3 price of 15s. On that assumption the allotment of ordinary stock, which amounts to £33 nominal per £too of debenture, would fetch £25, which, added to the £105 valuation for the preference stock, gives a total of £130. Moreover, on a longer view the ordinary £1 units may well be worth par, or even a little more.
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