Company Notes
By CUSTOS
AFTER a firm close to the old the new account opened brightly this week on the Stock Exchange with a good deal of professional buying of gold shares. Some stockbrokers seem to have decided that this is the market which will help them to pay for their Christmas presents, but the investing public should be chary of following their gambles. My colleague called attention to the friend- less condition of the Kaffir market on November 13th. It was certainly over-sold at that time. The best gold-uranium share —WESTERN REEF—WaS then quoted at 45s. It has now risen to 56s. which seems to dis- count the uranium extra dividend of 3s. 6d. which my colleague thought might be added in chie course to the present gold dividend of 2s. 6d. RANDFONTEIN has been even more spectacular, rising in this short period from 43s. 9d. to 69s. Very soon the market must run into a wave of profit-taking by the professional gentlemen.
* OVER the Christmas holiday every investor who was not a Scrooge must have had the chance to test the excellent and ingenious " Tri-ang " toys of LINES BROTHERS, the largest toy manufacturers in the world. With branches in South Wales, the Midlands and Northern Ireland, and overseas in all the Dominions, it uses no less than 18,000 tons of steel a year. Its main factory at Morden is capable of turning out daily for the Christmas rush 20,000 dolls, 40,000 mech- anical toys, 1,000 tricycles or scooters, 1,000 toy motor cars and 250 dolls' houses. Children are swayed by fashion, like every one else, and over 70 new brands of toys are devised each year. Only in the case of dolls is the demand steady and predictable but children have lately been demanding the latest toy washing machines which will wash doll's clothes. With its highly standardised production processes and the high quality of its product the, company, I feel, should be able to deal with the increasing German and Japanese competition. Of course, the assembly stages are done by hand but I read in the Financial Times that the only other case in which it employs a manual worker is in the manufacture of rocking horses which are carved out of solid blocks of wood by one skilled man working with a hammer and chisel. As the trade is seasonal, the factories usually concentrate on toys in the second half of the year, and switch to " Pedigree " prams from January to June. In the year to June 30th last the company suffered a slight set-back in profits largely because it would not increase prices to match a rise in production and packaging costs, but it earned 32 per cent. and repeated its dividend of 131 per cent. In the current year I under- stand that sales have gone ahead well, particularly in the export markets, and as it is bringing its production costs down further by improved layouts and new plant the profits should be higher. At 10s. 6d. to yield £6 7s. per cent. the 5s. shares seem reasonably valued.
IT iS good news that RECKITT AND SONS and J. AND J. COLMAN are to be amalgamated into one company. They are already 'purely holding companies, the first owning 651 per cent. and the second 341 per cent. of the operating subsidiary Reckitt and Colman, Ltd. which makes and distributes the well- known mustard, starch, blue and household polishes. I hope that the amalgamation means that the shareholders will at last get the dividends and write-up of capital for which they have been waiting so long. For twenty-three' years Reckitts have paid a dividend of 221 per cent.' For the last three Colmans have actually added a miserly bonus of 2 per cent. to their 18 per cent. in order to distribute the full amount received from the subsidiary. In the past two years the dividends of both holding companies have _actually been paid out of their reserves to enable the operating subsidiary to retain the whole of its profits to finance its expansion. Since the war expansion has been steady enough to cause a 50 per cent. rise in trading profits : yet no fresh capital has been raised. Only immensely strong companies could afford to practise this fairy-godmother finance. The shareholders are therefore entitled to look for a write-up of their stock on the amalgamation. Reckitts with an issued capital of slightly over £5 millions (of which £3.6 millions is ordinary stock) have a claim on £12.2 millions of the share capital and reserves of the operating sub- sidiary and Colmans with an issued capital of £3.5 millions (of which £2 millions is ordinary stock) have a claim on £6.4 millions. Both shares have risen sharply since the announcement and the terms of the amalga- mation will be announced this week. At present prices the shares yield around 4i per cent.
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