Company Notes
By CUSTOS
THE Stock Exchange has had a mild "shake- out" and only began to recover on Wednes- day. During these "down" periods the wise investor is always on the look-out to buy . the shares of the outstanding "blue chip" companies on a more reasonable yield basis. ROLLS ROYCE is a case in point. This week's prospectus of its £4 million 4 per cent. debenture issue (at 99) gave a brief record of its astonishing technical successes down the years. Its Avon jet engines and the Dart propeller turbine engines (fitted to the Vickers Viscount) have given the company its present lead in the aero-engine business. Lord Hives in his recent statement to share- holders was justified in emphasising the company's outstanding commercial -achieve- ment last year, which was to re-d: ploy its resources, following on the etas in Govern- ment requirements, so that its civilian busi- ness more than took up the slack. In civilian exports alone turnover rose to more than £11 millions—nearly double that 'of any previous year. Lord • Hives predicted a steadily increasing demand for his company's products for some years ahead. In 1953 the group trading profits before taxation increased by over 60 per cent. to £3.6 millions. Earnings amounted to 32i per cent. E.P.L. took £660,000. Eliminating that item and allowing for interest on the new debenture stock earnings would be over '58 per cent. The dividend was increased from 15 per cent. to 171 per cent. As I write the shares have fallen to 87s. ex dividend, which compares, with a high of 93s. 9d. At this price the yield is 4 per cent. It must be remembered that the shares are still "cum" the free scrip issue of one for two, which is to be approved on July 7th. On the increased capital the equivalent earnings ex-E.P.L. would be about 39 per cent. and the dividend 11 l per cent. It is reasonable to expect some small increase in the dividend. Even if it is only 121 per cent. to-day's yield would become £4 6s. per cent. Clearly, this is a share to buy on market declines.
I CALLED attention to FORESTAL LAND TIMBER in April %Oen they were 39s. 6d. They are now quote d at 34s. 6d. ex d'v'dend to yield nearly 61 per cent. This company has been develop:ng its tanning production business outside Argentina entirely out of its own resources. Its plant in Natal has, in fact,
been paying for the development of manu- facture in Rhodesia and Kenya. Its Rhode- sian Wattle Company will not reach the revenue earning stage before the end of 1956 while the Kenya business is only in the early stages of production. The company did well, therefore, to increase its trading profits.slightly in 1953 without taking credit for any profits earned in Argentina. Taxa- tion was heavier, so that net profits declined slightly, earnings amounting to 321 per cent. The dividend was maintained at 12 per cent. on a capital increased by a one-for-four free scrip issue in July last. The authorised capital is being increased by 600,000 shares and it is intended to make a rights' issue at some future date. The Argentine business prospered last year but has fallen off sharply in the current year. As dividends have been accumulating in Argentina since the middle of 1950 because it has been impossible to transfer the pesos into sterling a fall in the Argentine profits will not etkct the share- holders. Some casing of the transfer dill- culty is expected to follow on the recent Argentine mission to London, so that shareholders may some day receive a pleasant surprise. In the meantime the yield seems high enough to compensate for the political risks involved in the company's African enterprise.
THE 10s. ordinary shares of F. PERKINS, the manufacturers of light-weight diesel engines, were officially quoted on the Stock Exchange in March and they have advanced from 25s. to 35s. 6d. to yield 5.6 per cent. on divi- dends of 20 per cent. which were covered last year nearly twice by earnings. Turnover increased by 16 per cent. in 1953 to the record figure of £131 millions and the chairman was optimistic enough to expect similar advance in 1954. Subsidiary cony panics are working in Australia, France, Canada, South Africa and India. By helpinfl the Indian Government to establish its owl,. motor manufectur:ng industry it believes that it has been able to capture a large pelt " of the Indian market for its diesel engines. Clearly, the shares have growth possibilitieg and might be bought on any decline, especi' ally as there is a capital reserve equal to nearly 90 per cent, of the issued ordinal capital. Dividends are pad once a yeaf only and declared in March. There is there' fore no need to hasten a purchase.
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