Venturers' Corner
Having referred last summer to the preference shares of W. H. Dorman and Co., the Stafford firm of oil-engine makers, I think another glance at this company's position is justified in the light of the capital reconstruction scheme now put forward. The board is proposing to write off a total sum of £169,548, or, roughly, one-half of the capital, the effect of which will be to eliminate the debit balance on profit-and-loss account and bring down- the asset valuations to a conservative figure. With this object in view, the LI non-cumulative 51 per cent. preference shares are to be scaled down to los. each, but in compensation the rate of dividend is to be increased to I1 per cent., so that, assuming that the money is earned, preference holders will not suffer any loss of income.
What are the earnings prospects ? Unfortunately, the scheme is silent on this point, but obviously the board would not be bringing forward any scheme at all if the company had not reached a stage when dividends could be paid, once the capital position had been straightened out. As I pointed out in my previous reference to the shares, net profits for the year ended March 31st last had recovered to £19,654, which would have covered a 51 per cent. dividend on the preference capital by a big margin. Even, therefore, if one assumes pessimistically that no further improvement has taken place, and without allowing for a proposed saving in debenture interest, payment of the I1 per cent. rate on the pro- posed new los. preferences should not be beyond the company's capacity. The existing LI preferences, at 9s., do not look dear as a speculation in relation to their status under the capital scheme. If after the reduction to los. the II per cent. was forthcoming, a buyer would have a return of over [Readers' enquiries, or requests for advice, regarding particular shares will be answered periodically as space permits. Corre- spondents who do not desire their names to appear should append initials or a pseudonym to their questions.] - (Financial Notes on page 70.)
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