FINANCIAL NOTES

THE "GOLD SCARE" PASSES. - ANOTHER "gold scare" has passed over the City, and, like its predecessors, has proved to have had no immediate foundation in fact. President Roosevelt's definite statement that there is to be no change in the gold-buying policy of the United States Treasury, which has been absorbing large quantities of the metal at the fixed price of 35 dollars per ounce, had a decidedly steadying effect both in the Stock Exchange and the commodity markets. Although, however, there has been a moderate recovery in prices, particularly pronounced in South African and other gold-mining shares, it must not be supposed that this second spasm of weakness owing to gold uncertainties has left the market unscathed. Apart from any lurking fear that may remain that a major change in the international price of gold may, after all, be decided upon, current buyers of any but gilt- edged and other high-class investment securities must now face the possibility, that, even if there is no justification, another "gold scate " may arise at some future time and again unsettle markets. President Roosevelt, by his statement on the United States attitude, may have steadied the market's nerves ; but there is no evidence that he has laid the gold ghost permanently. * * * *

. _ REAL' AND NOMINAL CAPITAL

Although Stock Exchange prices are likely to remain sensitiv for some time' if only on account of the profound disturbance to which they have been subjected, the City was greatly relieved at the abandonment of the National Defence Contribution. One of the defects in which this measure abounded was the

(Continued on page 1128.)

FINANCIAL NOTES

(Continued from page 1126.) question of determining the actual capital employed in individual businesses. Mr. Magnus Goodfellow; who presided at last week's meeting of the Ever Ready Company (Great Britain), furnished shareholders with some instructive figures illustrating the difference between nominal and real capital. He reminded them that the issued capital of the Ever Ready Company stands at the low figure of £1,144,765, but that the Company had for many years ploughed back into the business roughly 25 per cent. of profits, in addition to obtaining considerable sums from premiums on new shares issued from time to time. For pur- poses of the proposed profits tax, however, a careful examination of the position was made by the Company's accountants, and the real capital now employed in the business was ascertained to be about £4,000,000. The difference between this and the nominal capital shows forcibly the scope of the difficulties which might have arisen in applying at least one of the provisions of the now defunct N.D.C.

It was evident from Mr. Goodfellow's speech that the Com- pany's trading position is highly satisfactory. Public demands for its goods has continued, fostered by the high quality and reasonable prices resulting from the high mechanisation of its plant. The whole of the stock carried at the end of the past year was purchased at prices ruling before the advance of the past six months, and the Company has advantageous forward purchasing arrangements. It is therefore not surprising that the Chairman was in a position to report that the current year's trading had opened promisingly, and that he was able to. foreshadow continued progress.

* * BOOTS DRUG PROGRESS.

The annual meeting of Boots Pure Drug Company served to underline the indications of steady progress given in the annual report. Lord Trent, the Chairman, pointed out that the net profit balance, showing an increase of £29,009 on the previous year, had established another record for the Company, and he went on to show that this increase in earnings was due to the establishment of a new high level of sales, and to a further extension of the vital service which the Company offers to the public. At the end of March last the number of the staff was 20,808, an increase of 1,143 during the twelve months. Lord Trent, whose speech is reported elsewhere, stated that the number of persons employed has increased by more than 3,000 during the past three years, while the Company's chain of branches has been increased by 127 during the Same • period. The numbers employed by the Company is important not only as an indication of its progress but because of the great part which the Boots organisation is taking in setting up a new standard of conditions of employ-. ment. The Chairman was able to take a moderately hopeful view of the future. He considers that prospects may be viewed with confidence, subject to general economic conditions in the country remaining stable and European politics improving.

In another part of his address Lord Trent had some severe criticisms to make on the trend of modern legislation. He considers the Chancellor of the Exchequer to have been wise to defer action on the Report of the Committee which con- sidered amendment of the Medicine Stamp Duty. That Report, he said, stands on record as a warning of the harm that may be done by people possessing the best of intentions and yet lacking the necessary knowledge, and he suggested that in all new legislation the advice of people competent to estimate the practical effect of proposed laws should be sought at every stage.

OIL COMPETITION IN INDIA.

An increase in the profit of the Burmah Oil Company from £2,411,173 in 1935 to k2,955,448 last year, with a rise in the total dividend from 20 per cent. to 22i per cent., sufficiently indicates an increase in the Company's prosperity in 1936. Mr. Robert I. Watson, who presided at the annual meeting, stated that larger sales of all oil products, with lower costs, were the main factors responsible for the improvement. He indicated, however, that while competition in the Indian market has recently been somewhat less severe than formerly, there is now the possibility of new entrants into the field. Mr. Watson referred in particular to the new Bahrein field under _the control of interests not hitherto deeply interested in Eastern oil markets, and to the arrangements which these interests had made to market at least a portion of the new Bahrein production in India. The meeting could have left no doubt in the minds of shareholders that the Company will oppose any attempt to cut into the Indian market, on which it rightly considers that Burmah production has the first claim. In defence of this claim the Burmah Oil Company has on more than one previous occasion met undue _competition with

(Continued on page v.)

FINANCIAL NOTES

(Continued from page 1128.)

success, and the account given by Mr.Watson of the Company's organisation and finances should leave no question of its ability to deal with any new competition which may develop. * * * *

OM. FROM COAL.

- Opinions may differ greatly upon the terigthi to which measures should be carried to stimulate the production of oil from coal and other materials produced in this country, but there is no doubt that the British Government is now fully alive to the importance of the question. Not only has a considerable preference been given to Home-produced petrol, but a Com- mittee has recently been set up to examine the various oil- from-coal prbcesses, and to report on their economic possibili- ties. Shareholders of the National Coke and Oil Company Were informed at the recent meeting that the Company has already placed its records before the Committee for examina- tion. The directors have evidently been encouraged to take this step by the report made by the Director of Fuel Research on the Company's Erith plant, and Mr. W. B. Mitford, who presided at the meeting, expressed the belief of the directors that the process has now passed out of the experimental stage. Much, however, will depend upon the reply of the Government Committee on the Company's claims to its attention, and this matter is so important for the Company that a further meeting of shareholders is to tr called when the reply is received. As one of the directors pointed out at the meeting, the support which the Company has received from shareholders arises from various considerations, including a desire to relieve unemploy- ment in the mining areas and to promote the burning of clean coal in this country. That there is a great measure of confidence in the efficiency of the process itself is, however, evident from the fact that the directors, in addition to waiving their fees, have guaranteed the necessary capital to carry the Company until- the reaction of the Government to the process has been fully ascertained. A total of approximately £5o,000 has been guaranteed by the directors and several of the shareholders, a figure which certainly suggests considerable faith in the ultimate success of the undertaking.

* * * *

GARDEN CTTY DEVELOPMENT.

In their report for the year to the end of March last the directors of Welwyn Garden City, Limited, stated that the period had been one of exceptionally rapid development, and evidence of this is provided throughout the Company's accounts. Ground rents and net revenue from farm and freehold property, and also from leaseholds each showed satisfactory improvement, and the net profit fbr the year increased to £20,137, compared with £16,038. This permitted an advance in the dividend from 2 per cent. to 3 per cent., with a substantial increase in the balance carried forward. As was to be expected in a year of activity, the balance-sheet showed freehold property account at £847,245, compared with £711,369 at March 31st, 1936, while investments and advances expanded from £594,325 to

£220,724. * * * *

THE RUBBER OUTLOOK.

Probably more investors are interested in rubber than in any other single commodity, and for this reason alone the remarks of Mr. Eric Macfadyen at the annual meeting of the tolden Hope Rubber Estate, Ltd. have a wide interest. After referring to the substantial decline in stocks of raw rubber during the past two years, Mr. Macfadyen foreshadowed that the recently increased releases under the restriction plan would soon lead to an increase in stocks. He pointed out, however, that the rising consumption of rubber itself calls for the carrying of larger stocks. Mr. Macfadyen considers that the International Rubber Regulation Committee has demonstrated its ability, in the absence of undue speculation, to maintain a dose hold on the situation, and that it has also shown impartiality between consumer and producer. Regard- ing the further outlook, he suggested that the present total prohibition of planting extensions is a question which is now ripe for reconsideration, in view of the time which new rubber takes to grow, and he believes that in the long run the chief problem is likely to be to ensure enough rubber for the world rather than to prevent overproduction of the commodity. A. H. D. A. H. D.