Finance—Public & Private
Railway Problems - • - DIVIDEND announcement's have now been made by nearly all the Railway companies and most of the annual reports have also been issued. In the main, and having regard to the appalling shrinkage in revenues disclosed inthe weekly traffic returns, the dividend announcements and the figures in the reports are no worse than had been expected, and, indeed, in the case of the Great Western Railway the shareholders had, in some respects, a pleasant surprise, for the final dividend on the Ordinary Stock of 2k per cent., making 8 per cent, for the year, far exceeded the market's, and probably the shareholders', expectations. The financial statement accompanying the dividend showed, however, that the net revenue had been assisted by £606,000 from profits realized on investments, £700,000 from the general reserve—which represented the whole sum standing to the credit of that account—and £400,000 from the contingency fund. In other words, the payment of the dividend was not out of last year's earnings, but was drawn from the special funds referred to.
THE TRUSTEE STATUS.
By thus paying 3 per cent, interest on the Ordinary stock, the directors of the Great Western Company have, of course, been able to retain the trustee status of the company's prior charge securities, and indeed, the Great Western stocks are now alone among the prior charge securities of any of the " grouped " railway systems in their retention of full trustee status. If, therefore, there should come a turn in the trade." situation bringing back greater prosperity to the railways, the present action of the Great Western will have been justified, for when once the prior charge stocks of English railways drop out of the trustee category of investments, at least ten years must elapse before restoration can be accomplished as the Act provides that at least 8 per cent, must have been paid on the Ordinary stock for ten consecutive years to make the prior charge issues rank as full trustee securities. On the other hand, as investors, no doubt, are aware, the prior charge stocks can rank as Chancery trustee stocks so long as some dividend has been paid on the Ordinary stock for ten consecutive years.
FURTHER ECONOMIES.
The most remarkable feature, however, of the annual reports of the railways is the further progress made in the matter of economies. The directors claim that these economies have been effected without loss of efficiency, and if such is the case the record is certainly a remarkable one. In the case of the -London. Midland. and Scottish, for example, the falling off in gross revenue of £5,431,000 was partially offset by s reduction in working expenses of 2,680,000, of whilth the net amount attributable to alterations in rates otowage.s and salaries was about £425,000. Moreover, this saving follows upon previous economies of over £10,000,000 effected during the four years 1829-81, and the saving in all business since 1927 is no less than £14,000,000. This is a truly remarkable record, but inasmuch as the gross receipts for the same period fell by about £19,000,000 the net results to the company are still disastrous, and ordinary stockholders go dividendless.
WHERE THE REVENUE GOES.
Not the least interesting part of the railway accounts is the analysis which is now given-of the direction in which expenditure has proceeded during the Year. Thus in the case of the Great Western, for example, it is shown that of each pound of revenue during the past year I Is. 7d. went in wages, Is. 8d. in coal, 2s. 8d. in other material, Is. 3d. in rates and 4s. 4d. in interest and dividends. These items added together would make up Is. 2d. beyond the 20s., the difference of Is. 2d. representing subtraction from reserves. In the case of the London, Midland and Scottish Company, salaries and wages absorbed I Is. 20., coal Is. 40., other materials 2s. 90., rates and sundry items is. 7d., and interest and dividends only 8s. 00.
DIRECTORS AND STOCKHOLDERS.
In view of the present plight of the railways and the grave problems with which the companies are confronted
the directors are to be commended for giving to the stockholders the fullest possibleinfermation With regard to the inwardness of the position. This is a course I have strenuously advocated in these columns for some years past and I would like now particularly to call attention to, and also to commend, the policy of the directors of the LOndrin, 'Midland and Scottish Railway as regards the endeavour to present the accounts to the stockholders in a manner easy to follow and also the effort made by all the railways to keep stockholders informed concerning two of the main problems with which the railway directors are confronted,-narnely, working costs and road competition. As regards the former of these points,- the- L.DE and S. directors have placed inside the summarized annual report a copy of Sir Ralph Wedgwood's final speech to the National Wages Board, summing up the case for the railways in the matter of the wages controversy recently considered by the Board. It may be _useful, perhaps, to recallthat something like a stalemate was the result of that Conference, the partisans of the railways standing out for the full claim for reduction in wage and the partisans of the workerestanding out for no reduction-fit all. The chairman in--a tasking vote decided in favour of a very small reduction in the wage, and in spite of its being much below the amount, required by the railways, the decision was subsequently accepted by them but was rejected by the workers. I would recommend to railway stockholders that they should read carefully this summary of the position by Sir-Ralph Wedgwood.
RoAn ComPETrriox,
it is not only, however, with regard to the question of wages that the railway companies are now taking stock- holders .very fully into their confidence, but at long last they are pursuing the course which I have so strongly adVocated, namely, soliciting the co-operation of the stockholders in the matter of protests against subsidized road competition. Stockholders are receiving circulars from the railway directors stating concisely the case of the railroads with _regard to road competition. They accompany their statement of the case with a circular from the British Railway Stockholders' Union which is evidently joining with the railroads in bringing to the notice of railway stockholders the manner in which by joining this Union they may be able more effectively to express their protests against unfair road competition and thereby do something to protect their interests which have been so greatly jeopardized during the last few years. It is now "up to" the stockholders to use every means in their power te make effective their protests against anything in the shape of subsidized competition while their efforts may also yet be required to see to it that if con- ditions become more favourable for the railways, their interests are fully protected in the direction of full efficiency in railroad aumagement. For in the past there have been some grave shortcomings in that. direction.
ARTHUR W. KIDDY.
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