FINANCE AND INVESTMENT
By CUSTOS W. H. Smith Results
Investors who have taken an interest in W. H. Smith and (Holdings) since this old-established business of booksellers newsagents was made a public company in August, 1949, sho be satisfied with the results now disclosed for the year to April I 1950. Consolidated profit has fallen from £646,836 to £611,028, the preliminary statement makes it clear that the latest figure been struck after charging £130,736, against £83,634, for depreciati and after providing £708,569, against £720,075, for taxati After making allowance for these deductions it will be appar that gross profits, before depreciation and taxation, were practic unchanged. Such results justify the forecast made by the direct in the prospectus issued last August, that unless there was so material change in trading conditions profits would not differ grea from those of the preceding year. The directors also forecast t for the period of tout 7 months from its formation to the e of March, 1950, the new holding company would pay a divide of 7 per cent., equivalent to 12 per cent. for the full year. 7 per cent. payment has now been declared. Investors who p 40s. for the £1 Ordinary shares and 8s. for the 4s. Ordinaries v. the public offer was made last August have come out well. Toda quotation is around 45s. for the £1 shares and 9s. for the 4s. shar at which the yield is_roughly 54 per cent. It seems to me that W. Smith Ordinaries ate still well worth holding as a sound but perha not very exciting industrial investment.
Richard Thomas Strength
In its full report for the year ended April 1st, Richard Tho and Baldwins, the sheet steel manufacturers, show a further incr in earnings, which cover the 15 per cent Ordinary dividend by large margin. Net profit for the year was £1,881,757, against c bined Preference and Ordinary dividend requirements of £807,5 As to the future, Mr. E. H. Lever reminds shareholders that effect of the rise in transport charges as from May 15th will to increase the manufacturing cost of finished steel by 10s. a I He expresses the view that, while some part of this additional bu will be met by improved efficiency, it must have some effect current profits. That is far from implying, however, that tit 15 per cent. dividend rate on the Ordinary shares is in any wal jeopardised. At 13s. 6d. the 6s. 8d. Ordinaries, yielding just 0 74 per cent., look distinctly undervalued, especially when it is bo in mind that the proposed takeover price under the Government nationalisation plan. is 15s. 3d Like many other iron and it shares Richard Thomas and Baldwins' Ordinaries have the
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AFTER the first impact of the Korean thunderbolt the City is s( beginning to try to sort out the investment implications of the li situation. As nobody can yet be sure what the new " situation " the task of the investment adviser is far from being easy.- If take the most optimistic view—that America's intervention in Kor will meet with a quick success and be followed by a cooling dm of the cold war—then 1 suppose one would be enthusiastic abo the market outlook, and especially about gilt-edged stocks and go shares. Expectations of further rises in commodities, such as rubb and base metals, would have to be somewhat scaled down. But this sort of optimism justified ? I doubt it. Let us consider for moment the most dismal view of the- outlook—that we, are ra witnessing an early move in a Soviet plan to raise the temperatu of the cold war with the object of forcing the hot war—a maj show-down—at an early date. What would that imply in ten of investment ? Well, one would have to assume that in the mai conflict the democracies would triumph, whatever the cost. 11 right course would seem to me to lie in the direction of liquid; and, most certainly, to be out of gilt-edged stocks, which cou not possibly thrive on high taxation and war uncertainties, and o of gold shares. But that view seems to me to be too bad to I true, just as the other seems too good. Let us take the middle view- which looks at the. moment the most sensible—that there will I no quick American victory in Korea, that uncertainties will contiui and the tepid war may gradually grow warmer. What then ? A I see it, one should read that situation as inflationary and thereto bad for gilt-edged and good for equity shares, and especially ft commodity shares. At this stage one cannot do more than surmil but inflation is already beginning to leave its mark on commodi prices. I think this process will continue. Copper and rubber shan are my first choice.
FINANCE AND INVESTMENT—(Continued from page 64) of looking undervalued on earnings prospects, as well as bei quoted substantially below the takeover level if the Government' plans should materialise. They are an attractive purchase.
Lewis Berger Outlook
Keener competition and smaller profit margins in the paint tra are reflected in the latest accounts of Lewis Berger and Sons in drop in consolidated earnings from £875,505 to £801,450. Thit fall has taken place in face of a substantial increase in sales. taxation has called for about £60,000 less than in the preceding yea and other charges are reduced, net profit is slightly higher £453,734. Of this sum the,-Preference dividend and the 33 per cen distribution on the Ordinary capital absorb only £111,100. Ea ings on the Ordinary capital work out at approximately 130 per cen In his statement accompanying the accounts Mr. Thomas Lilley, th chairman, goes on record with the statement that " future divides recommendations should recognise the equity of stockholders' pa ticipation in the company's additional earnings which accrue as result of the conservative dividend policy which they have san tioned." This is clearly a pretty broad hint of an intention to pay higher dividend in future, provided earnings continue to justify i As to prospects, Mr. Lilley is optimistic. He emphasises t the long-term policy initiated to maintain earnings against the retu of the present competitive conditions in the paint trade is no bearing fruit and that there has been another substantial increa in sales in the early months of 1950-51. Lewis Berger is a pr gressive concern with alert management and strong finances. T 4s. Ordinary shares now quoted around 28s. 3d. are yielding over 41 per cent. On a long view, they should give a good into return and improve in capital value
A Liquidation Share
Continuing my recommendations of shares which look attractiv for their break-up possibilities I suggest that• the £1 Ordinaries the Sudan Plantation Syndicate are worth considering around 7 The balance-sheet, dated June 30, 1949, which has just been issu shows total capital and reserves of £8,986,985. Almost the whol of this amount is now represented by cash and money due fr the Sudan Government for payment of the assets which have b taken over. This company's concession ended on June 30, 19 The company has therefore still to receive the benefit of the cro the harvesting of which has just been completed. According the chairman's report, the crop was in quality and quantity w above average and has been sold at a satisfactory price. It see reasonable to assume that the profit will be not less than that of t previous year, i.e. £2,704,699. The exact amount of tax payab by the company on its final' year's profit cannot be calculated, but think it is fair to assume that the reserve already created £1,438,000, plus the amounts charged in the latest year's accoun will be sufficient to cover the tax liability. On this assumpti there would be a total sum of £10,253,684 available on the 2,475, Ordinary £1 shares, which works out at 83s. a share. The directo have already intimated that every effort will be made to exped the preparation of the final report and accounts, whereupon liquidator will be appointed. It is believed that the whole liquidati should not take much more than one year. A buyer at 70s., wli would involve a further 2s. a share in broker's commission a stamp duty, would thus seem to have a satisfactory tax-free pr of about 1 ls. to go for—a good investment proposition provid the liquidation is not too long drawn out.
Brush Electric Rights
As I have often pointed out, the issue of new Ordinary shar sometimes provides an opportunity for acquiring a stake in company on attractive terms. The effect of the new issue is bring down the price of the existing shares to what often proves be an unduly low level. A case in point seems to be the 5s. Ordina, shares of the Brush Electrical Engineering Company. They we quoted around 6s. 9d. until a few weeks ago, but have now fat back to a few pence over par following the announcement of a ne issue of shares at 5s. in the proportion of one new for every N held. At the moment the " rights " are quoted in the mark around 3d., which means that a buyer undertakes the liability put up the 5s. which falls due on July 28. He is, in effect, bull into the new Ordinaries at 5s. 3d.r but has the advantage that t broker's commission on,the " rights " is small and that there is stamp duty to pay. At a few pence over par these 5s. shares I good value for money. In each of the past two years the comps has paid a 10 per cent. dividend and the directors forecast that t rate will be maintained-on the larger capital.
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