SOUTHERN PREFERRED MERITS
In fact, it is difficult to avoid the conclusion that Southern Preferred, which has fallen from 66 to 601 since the accounts were published and which still includes £4 gross of dividend in the price, is now the outstanding bargain in the railway market. The full accounts confirm the impression that last year's satisfactory net revenue—I mean satisfactory in rela- tion to the very unsatisfactory circumstances—was due prin- cipally to reductions in expenditure. Total expenditure last year, at £20,427,442, was only some £460,000 higher than in 1937, which implies that the experience on the costs side was much more favourable in the second than in the first half of the year. Another source of help was an improvement in the net receipts from steamboats which rose quite sharply by a little over £60,000 to £397,672 and more than counter- balanced a fall of £42,700 in the net takings from docks, harbours and wharves.
At first sight it is a little difficult to understand why the Southern board should have chosen to pay the full 5 per cent. on the Preferred stock when only 44 per cent. was earned and the outlook for receipts is still very blurred. The explanation may be that the company stands to gain substantially from the projected increase in fares in the London area, which, it is estimated, may bring in an extra 00,000 in a full year. Allowing for this factor and for a further reduction in expenditure compared with 1938, I feel that in any reasonable trading conditions the Southern should be able to hold its own this year. For that reason the Preferred yield of well over 81 per cent. seems to me an adequate compensation for the risk.
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