16 AUGUST 1957, Page 26



THE same influences were at work in the stock markets this week as last. The gilt-edged market lacked support, industrial equities were mixed—an analysis of industrial reports this year shows that equity earnings are lower than last year—oil shares were dull and the dollar premium (now 14 per cent.) was still falling under the weight of a reactionary Wall Street. A few good features were seen. FURNESS WITHY rose on the 30 per cent, jump in net profits, the increase in the dividend from 16 per cent. to 18 per cent. and the two-for-three scrip issue. At 78s. the shares yield over 4.6 per cent., but this would be improved if the dividend is raised next year on the enlarged capital. HAWKER SIDDELEY were active on the bid by A. v. ROE for a controlling interest in Dominion Steel. Hawker have risen from a 'low' this year of 32s. to over 42s. Their acquisitions have been so rapid and widespread that it is impossible to regard the shares at this price as anything but speculative. Investors should remember that this is not a time to take market risks. The 'bull' market is suffering its first serious reaction since it started at the end of 1956.

Having previously recommended the shares of the merger company Hovis-mcDouGALL I was very interested to hear how the chairman, Mr. Kenneth Moore, explained the fall in profits at the annual general meeting. First, the large stocks of wheat had to be written down at March 31 to their market value, prices having fallen be- tween £6 and £5 a ton between January and March. (These stock losses were written off out of current profits, not reserves.) Second,' the removal of the bread subsidy last autumn was followed by a price war among the millers (Ranks and Spillers) so that profit margins in the Hovis flour business fell 'almost to vanishing point.' Third, both Hovis and McDougall spent larger sums on sales promotion, which were written off out of current profits. Fourth, profit margins fell generally. The benefits of the merger should be felt in the current year and the 15 per cent. divi- If:lend should be better covered. At 11 s. 6d. the 5s. shares are fairly valued to return 61 per cent.

* * * Newspaper shares are not popular investments —in spite of the undoubted tough efficiency of the newspaper managements. What has made the market worse this year—the index his fallen 10 per cent, against a rise of nearly 15 per cent. in