FINANCE AND INVESTMENT
By CUSTOS
MARKETS are standing up to the war news just as well as any- body would reasonably expect. Many of the City's most stubborn optimists are already arguing that America's entry into the war is a " bull point." They base this view on the theory that actual shooting war was necessary before America's war effort really got into its stride. Hence the tempo of the war will now be quickened and victory is brought nearer. I do not quarrel with this line of reasoning, but I feel it is rather a different line from the blithely optimistic forecasts of a German collapse which the same people were bandying about a few weeks ago. In any event, markets have reacted, as they must, to more realistic short- term considerations. Japanese bonds, for example, have fallen to a level at which the Imperial credit is valued at about 2s. 6d. in the pound, a dismal end to a record of financial behaviour which has been a model for debtors.
Other securities to suffer badly include Far Eastern banking shares, the shares of a host of rubber and tin companies, Shell and Royal Dutch Oil and British-American Tobacco. In all these cases the falls in quotations, most of which have been precautionary rather than the result of actual pressure to sell, are a logical adjustment to the course of events. It says a good deal for the toughness of markets as a whole that the groups not directly affected by the extension of the war have yielded very little ground. A gentle subsidence of k to in gilt-edged and losses of 6d. to Is. in home industrials do not indicate weakness. They merely point to a driblet of sales which, for the moment. are not offset by fresh buying.
RHOKANA AND TAXATION Rhodesian copper producers are among the hard cases under too per cent. E.P.T. Cuts in dividends have already brought home to shareholders how heavily the taxation burden weighs upon net earnings. In its accounts for the year to June 3oth the Rhokana Corporation shows a fall in operating profits from £2,869,978 to £2,172,198 and a fall in net profit, before tax, front £2,773,801 to £1,882,803. There was no dividend from the substantial investment in Mufulira Copper, that concern being unable, through heavy taxation, to make any payment. For Rhokana shareholders all this has meant a reduction in dividend from 4o to 3o per cent. Even this may seem a good return on capital, but, as Sir Auckland Geddes points out, the issued ordinary capital of L2,5dt000 represents only about one-seventh of the resources employed in the business. This year's dividend therefore represents a return of just over 4 per cent. on a wasting asset. Rhokana LI shares, standing at £71, offer a return of less than 4 per cent. They are worth holding for their long-term prospects.
CARRERAS' RECORD PROFITS Larger sales and small distribution expenses are probably the main influences in the new record profits of Carreras. Pre- liminary figures show a net figure, after taxation, for the year to October 31st of £2,215,514, against £2,204,970. Unfortunately, this year's statement does not give particulars of the depreciation and taxation charges. In the preceding year E.P.T. operated for only part of the period, so that the burden must have been heavier in the year just ended. Rather surprisingly the dividend is up from 26+ to 27+ per cent. and the carry forward is increased by £34,271 to £311,168. Carreras Li " A " ordinary stand at £s+ and the " B" 2S. 6d. shares at 14s. 3d. The yield of practically 5 per cent, seems to me to make the shares attractive.
Previous page
