FINANCE AND INVESTMENT
WITH one eye on the Continent and the other on Wall Street, speculators may be forgiven if they appear just a little distrait when their attention is invited to developments on the home front. At the moment neither politics nor American business suggests that sustained or general market recovery is imminent, so investors, as distinct from specu- lators, may just as well get their teeth into the domestic news. and extract from it whatever good they can. The really big news has come from the railways, and I think there is a lesson to be learnt. Like the Southern, the London, Midland and Scottish and the Great Western have reported larger net revenues and declared higher dividends for 1937, but, as I suspected, there has been no enthusiastic support for the ordinary stocks. L.M.S. ordinary, indeed, has tumbled precipitately from 26i, to 22, both the dividend and the earnings having fallen short of most expectations. The significant feature of the companies' accounts is that, apart from the Great Western, railway operations contributed virtually nothing to last year's rise in net revenues.
On the Southern 90 per cent. and on the L.M.S. 86 per cent. of the increase in gross railway receipts was swallowed up in additional expenditure ; thanks, no doubt, to the late recovery in South Wales, the Great Western was able to keep about 30 per cent. of its gross improvement as a net gain. But an important source of the Great Western's net revenue increase—and on the Southern the main source— has been larger receipts from ancillary services, such as docks, harbours, steamboats, &c. This is a welcome develop- ment but not, in my view, a dependable source of improve- ment, especially on the Southern, whose steamboat receipts had the benefit last year of Coronation traffic and a cheaper franc.. My own feeling is that the railways are only just holding their ground with the aid of the recent increase in charges, and that it would be unwise to budget on a further expansion of net revenues for 1938. As a corollary, I con- sider that the ordinary stocks are less attractive than the prior charge issues, such as L.M.S. First Preference or thz 1923 Preference at current prices.
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