FINANCE' AND INVESTMENT
By CUSTOS
Jun as international political tension has eased, the uncertainties of the international currency situation have re-asserted themselves as a factor in the investment equation. Canada's decision to set her currency free, obviously made with the desirability in mind of approach- ing nearer to parity with the American dollar, has come as a powerful reminder of the impermanence of the present pattern oi•exchange rates. Closely followed by the publication of the gold and dollar reserve figures of the United ICingclopm for the third quarter of the year—which show a further substantial strengthening of the position—it was clearly bound to start fresh talk of a possible revaluation of the pound. Offi- cial denials of any such intention have been forthcoming with remark- able promptness, and I am bound to say that on this occasion I am inclined to believe that these reassurances can be trusted. Admittedly the pound is gaining strength, but the gold and dollar reserves of the sterling area, which now need to be considered in relation to the greatly increased level of world prices, and the large external indebtedness of the United Kingdom, require to be built up to a much more impressive total. In my view, therefore, investors in gold shares should not panic. On the other hand, I do not take the view that the improvement in gilt-edged prices, although it is being fostered by sterling revaluation talk, is unjustified. So far as one can see ahead, the danger. of a fresh currency crisis on the external front, which has constituted the main threat to the stability of interest rates here, has passed. In spite of the, gently rising tide of inflation, fixed interest stocks may well succeed, in these days of managed money, in holding their ground.
Eastwoods ' Dividend Raised
Threatened by the Government's cement nationalisation proposals, Mr. G. W. A. Millar, the chairman and managing director of the East- woods' group of companies, has taken the bold line of raising the Or- dinary dividend. For the year to March 31st the Eastwoods' board are proposing a final payment of 8 per cent, on the ir million of Ordin- ary stock, bringing up the total distribution to 12 per cent., which compares with 8 per cent. for each of the two preceding years. In thus breaking away from dividend limitation in the strict sense, the East. woods directors can- point to a sharp increase in the group's trading profit. This is up from £281,971 to a new record of37I,ozI, reflecting an expansion of output and trading to new records in every branch of the business. It is well to remember that the activities of this group extend over a wide field, covering the manufacture of bricks and tiles, the business of barge and wharf owners, builders' merchants and transport contractors, as well as the production of cement. A scheme for segregating the cement assets was approved by the stockholders last November.
The preliminary figures for the year to March 31st show that taxation called for £142,957, against £99,757, and that the charge for deprecia- tion of plant was raised from £77,089 to £98,851. They also show that the carry-forward, in spite of the higher Ordinary dividend, is being raised by nearly Z25,000 to £79,609. Although the cover for the Ordinary dividend is not particularly strong, the Li Ordinary units seem to be quite fairly valued around 35s. 9d. to yield £6 I2S. per cent. The group has built up a strong financial position and has the advantage of alert management.
A Cheap Industrial
Among the industries making rapid strides in the export market are the manufacturers of heavy motor vehicles: The Ordinary shares of most of the larger units in this industry are priced to yield something between 4 per cent. and 51 per cent. It should be opportune, there- fore, to look into the possibilities of the equities of some of the smaller concerns, whose trade is expanding in the favourable trading con- ditions now prevailing. The 28. Ordinaries of Atkinson Lorries (Hold- ings) look interesting from this standpoint at their present price of 7s. For the nine months to March 31st this company paid a dividend. of 25 per cent., equivalentto 33 1/3 per cent, for the full year. Moreover, this payment was made out of earnings of over 8o per cent. Taking 'the 33'1/3 per cent, annual dividend basis the yield at 6s. IAA. is the attrac- tive one of 91 per cent. This company owns works at Preston and Balham, and manufactures and distributes heavy commercial vehicle chassis and heavy and light vehicle bodies. It also repairs all types of mechanical vehicles. Profits for the nine months to March 3 1st, 1950, were practically as large as for the previous year, the increase in the annual rate of earnings being due more to improved methods than to an expansion of output, which was limited by the steel quota. Nearly one-third of the output was sold for export. In July the chair- man stated that turnover was still running at a consistently high !eve; and that, although the full effects of the new purchase-tax on vehick chassis imposed insthe 1950 Budget had still to be experienced, there had been no serious repercussions up to date. He expressed his con- fidence that the company would continue to do well in spite of difficull conditions and disclosed that orders were "quite satisfactory." Offer- ing a yield of substantially higher than the average for the cpmmercial
behind the dividend rate. purchase at
vehicle group, these 28. Ordinary shares look an attractive the current price, especially having regard, to the strong'earnings cover
Previous page
