Venturers' Corner One is always a little uneasy about companies
which expand very rapidly. Is consolidation getting proper atten- tion? Is the lust for mere size dominating what may have been the original aim of true rationalisation? Are compet- ing businesses being bought at reasonable prices ? These are the questions investors need to satisfy themselves about whenever they contemplate hitching their waggon to a rapidly rising industrial star. A company which, in my view, comes out of these tests with credit is Allied Bakeries. In the past three years this combine, which has dynamic management, has bought up a large number of undertakings all over Great Britain. Its issued capital is now nearly £2,000,000, and during the year ended June 3oth, 1938, its profits were more than doubled at £137,250. This repre- sented earnings of 14+ per cent. on the Ordinary 5s. shares, and a 10 per cent. dividend was paid.
For the current financial year, ending on June 3oth, the interim has already been raised from 4 to 5 per cent. and I shall be surprised if the total is not brought up to 12 per cent. During the June-December period earnings have increased substantially, justifying an expectation that, in reasonably satisfactory general conditions of trade, over 20 per cent. will be shown on the ordinary capital. Allied Bakeries 5s. ordinaries are at present quoted at 9s. 6d., at which the yield on last year's dividend is just over 5 per cent. If, as I anticipate, the dividend is increased to 12 per cent., the return will be raised to about 61 per cent. In my view these shares are a speculation with a chance of a gradual rise in price.
CUSTOS.
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