FINANCE AND INVESTMENT
By CUSTOS
FAR Eastern developments have put the stock markets through another test which has brought fresh proof of technical strength and resiliency. All that happened at the beginning of the week was that jobbers acted warily, marking quotations down in the groups, such as Japanese and Chinese bonds, specifically affected, and potential buyers hung back. In no section of the Stock Exchange was there any real selling, with the result that by Wednesday, when most people were prepared to view events more hopefully, recovery tendencies were already apparent. I do not look for any sharp and sustained rise just yet, but I am prepared to see the cautious advance resumed which, apart from minor setbacks, has now been in progress for several months.
For the moment Home Rail stocks are out of the picture, not so much because the interim dividends have merely been main. tained at the 1940 rates, as owing to the railway boards' statements on the subject of the negotiations with the Government. Some speculators, it seems, had banked on an early settlement. Now that this prospect appears remote, these " bulls " have sold. I still feel that when the terms of revision are announced they viE be such as to justify a substantially better valuation for the border. line stocks. L.M.S. 1923 preference at 42, L.N.E.R. first pre. ference at 421 and second preference at 15 all look to me to be good purchases, both for yield and capital appreciation.
ROYAL DUTCH RESULTS
Shareholders in the Royal Dutch Company must have been prepared for a further contraction in earnings. There will be some disappointment, all the same, that the board has decided to pass the preference as well as the ordinary dividend for 154o. Last year's abnormal difficulties are reflected in a fall in dividend income from Fls. 26,000,000 to Fls. 23,093,085, interest receipt] were down from Fls. 200,000 to Fls. 67,896, but there were profits of Fls. 364,311 on sales of securities. A sum ri Fls.25,243,271, representing the whole of the year's profits, plus the carry forward, is transferred to reserve against loss on invest. ments. This fund is set up to provide against losses on invest• ments in a number of companies " which have sustained, or mu! still sustain, losses through enemy action."
BOOTS RECORD PROFITS
For the first time in the history of the company trading profile of Boots Pure Drug have passed the £4000,003 level at £I,000,77 against £973,851 for the year to March 31st, 094o. This figure is struck after taxation, which the chairman, Lord Trent, states in his survey to have called for £623,490 more than in the standard period for E.P.T. in addition to L611,700 for Purchas Tax. It is obvious, therefore, that the company achieved is modest rise in trading profits on the basis of a very considerable increase in sales to the public despite the handicaps of Limitants of Supplies Orders and damage to properties. Following their traditionally conservative financial policy, the board have raised the depreciation charge from £102,084 0 L;112,698, and £168,395 has been charged for A.R.P. and war damage insurance, of which only £45,00o has been met by special transfer from contingencies reserve. Heavier taxation Ins, of course, reduced the earnings on the ordinary capital, wiled work out at just over 36 per cent. against about 5o per cent. it the preceding year. So, in spite of the record trading figura, ordinary shareholders get a dividend of 24 per cent. compared with 24 per cent. plus a 7 per cent. cash bonus for the year et March 31st, 0940. As usual, the balance-sheet position is brk mensely strong from the standpoint of reserves. The pressure of increased business on cash resources is reflected, however, it the emergence of a bank overdraft of £502,298. Boots 5s. ordinall shares, at 36s., offer a yield of less than 3+ per cent, a strikist tribute to the company's potentialities. For ffie present they sees to me to be fully valued.
AN E.P.T. SUGGESTION
After the innumerable onslaughts on the zoo per cent. Ewa Profits Tax which have been launched by company chairmen the past few months it is refreshing to find attack accomp by a constructive suggestion. At the meeting of J. Comps Sons and Webb, the uniform makers, the chairman, Mr. James Tucker, made it plain that E.P.T. operates harshly against undertaking. He is also convinced that the unfair incidence the tax is causing a good deal of resentment and irritation. is the solution? Mr. Tucker suggests that the Government sh give an assurance to all E.P.T. payers that when the war is o and more time is available to examine the practical results
the tax, the whole matter should be reviewed and any se iniquities should be corrected. In other words, he asks for end of the present bickering, which must hamper the war eff on the basis of an official assurance that proved wrongs Will righted when peace returns. This seems to me to be a co sense proposal.
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