* * * *
TRANSPORT "C" PROSPECTS
There was nothing in Mr. J. F. Heaton's address at the Thomas Tilling meeting to alter my hopeful view of this company's ordinary shares. Mr. Heaton is always a cautious prophet, and when he says that the outlook points to the to per cent. dividend being maintained on the larger capital I am prepared to believe that he is right. The really sur- prising reference in his survey is to the prospects of the London Transport Board, in which Thomas Tilling is, of course, the biggest single holder of the " C " stock. In his view the standard rate of 51 per cent. should be forth- coming on Transport " C " for the current financial year ending on June 3oth, although he does not advance any specific reasons for this prediction. As I have previously emphasised in these notes, neither the trend of current gross receipts nor of costs suggests that the Board will earn 51 per cent., on the strict accounting principles hitherto adopted, during the current financial year. It will be surprising if earnings exceed last year's dividend of Lti per cent. Why, then, is Mr. Heaton, an acknowledged transport authority, so optimistic ?
I can think of only one reason, and that is the clause in the London Passenger Transport Act which provides that, beginning with the current financial year, holders of at least 5 per cent. of the total " C " stock outstanding shall ha; the right to apply to the Court for the appointment of a Receiver in the event of the Board failing to pay the standard rate of 51 per cent. To pay an extra if per cent. the Board would have to find an additional sum of, roughly, L320,o0o, which seems trifling in relation to last year's allocation, out of profits of £2,400,000 to renewals. Presumably Mr. Heaton takes ;he view that the Board, having made very generous provision under this head in its first five years of operation— total renewals and maintenance reserves already exceed £8,500,000—will now feel justified in cutting down this charge to, say, £2,000,000, so as to pay the standard " C " dividend. If that can be done without any skimping of essential renewals, it probably will be, but I do not feel sure. I think the chances are good enough, however, to make the " C " stock worth holding at 82. Cusros.
Previous page
