INVESTMENT NOTES

By CUSTOS

THE gilt-edged market is now setting its sights higher—a 4-1 per cent. Bank rate is the target. A reduction to 5 per cent. this week would be a help and if it materialises the 'stags' of the AEI 6 per cent. debenture issue (heavily oversub- scribed) will be taking a fine profit. Investors should not be in any hurry to leave the. long-dated stocks or the 6 per cent. new issues. Industrial shares remain firm—helped no doubt by the amazing confidence of Wall Street—but I have no wish to change my very limited equity policy. MARKS AND SPENCER responded to the noble speech of the Chairman, Sir Simon Marks, who Justly claimed credit for 'breaking the price bar- rier in the public interest,' but I would leave the shares to those who can afford to sit tight with a yield at 43s. of only 31 per cent.

United Drapery

Among the 'consumer goods' shares which I have been recommending as the safest equity bet' at the present time, UNITED DRAPERY may reasonably be included. For the year ending Feb- ruary 1 the group trading profit was enlarged by over 13 per. cent. as a result of the opening up of new branches and the over-all increase in turn- over, which was greater than the national average. The balance sheet shows a strengthening of the financial position under almost every heading, net current assets increasing by 9 per cent. and total net assets by nearly 7 per cent. In his annual state- ment Sir Brian Mountain, the Chairman, stated that since the end of the financial year the turn- over had been well maintained. On the recent reduction in purchase taxes prices of the goods affected were immediately reduced and some stock losses were consequently suffered but these are expected to be offset by increased turnover. The Company cannot, of course, escape the ill effects of a general trade recession, as it caters for all kinds of clothing and household requirements, but if the Chancellor is to be believed, it is not likely to suffer a serious one. The dividend of 321 per cent. has been maintained on the increased capital.

Steel and Stewarts and Lloyd My impression is that the market is over- discounting the political risks of steel shares. The Labour leaders aye changing their views on nationalisation so radically that it is by no means certain that a Labour Government would do more than make the individual steel companies sub- servient to a new steel board and conform to a dividend stabilisation plan. The fact that steel out- put is now declining and that apart from steel sheets and tinplate supply is in excess of demand has made the market very bearish. Its bearishness was not alleviated by the gloomy statement of the directors Of STEWARTS AND LLOYD, whose tube business has been adversely affected by the

f i

all n demand from the oil industry. In maintain- ing their interim dividend at 3 per cent. they said that this must not be taken as indicating that the Anal (last year 8 per cent.) will be unchanged. As earnings in the previous year were sufficient to cover the 11 per cent. payment 6.4 times this was an extraordinary statement. HADFIELDS has

(Continued on page 818) ment of fabrics and man-made fibres with special standards of performance. We have in mind the need to ease the work of the housewife by intro- ducing drip-dry and easy to launder garments. I can do no better than to quote from my speech at the last meeting of the shareholders :—

"Much of the progress we have made in the improvement of our goods stems from the systematic and continuous work of our scientists and technologi,sts. Their task is to study ways and means of up-grading our goods, always bearing in mind value and price. Their duties are to keep abreast of any interesting developments in the textile field which can be speedily incorporated in our goods."

FOOD DIVISION Although textile goods form the main part of the business, the Food Division is becoming in- creasingly popular and important. In particular, our bakery products are making remarkable progress in variety and quality; the volume of sales is rising steadily. This again is due to the close co-operation between our Buyers, Food Technologists, and a number of leading, well-known suppliers. In order to deal with the expanding business, our friends have re-equipped, enlarged and modernised their bakeries. Production has been regionalised to enable us to provide the public with oven-fresh goods by speedy and frequent deliveries.

We are specialising in selected and graded Fruit which is a substantial portion of our food sales. We work closely with a number of growers and packers of fruit at home and throughout the world, with most interesting results.

DEVELOPMENT PROGRAMME The transformation of our Stores proceeds apace, and the development programme is progressing systematically. We are concentrating on enlarging our existing Stores where we have successfully traded for many years.

In the past year we put in hand 24 important ex- tensions and completed thirteen. The present pro- gramme calls for six further extensions, to which will be added others as soon as final plans are ap- proved. The time needed for the completion of many of our important projects is considerable, and some of them in hand will not be available for business until late 1959.

In the past year we expended the sum of £3 million on expansion and modernisation, and this year we have allocated a similar sum for this purpose. We are operating some 300,000 feet of counters and racks, and are continually adding to the selling space necessary for the proper presentation of our goods and for the comfort and convenience of the public.

We have available a large area of selling space which has yet to be developed. The considerable finance required for this purpose will be found from profits ploughed back into the business year by year.

COSTS OF ADMINISTRATION I spoke to you last year of our successful efforts in reducing the costs of administration. In simplify- ing methods and procedures we eliminated a great deal of unnecessary paper work on which large numbers of our staff had been engaged.

There is a constant examination of our present methods and we are continuing to find ways and means of cutting out unessential work and of further simplification. In this way we have been able to maintain the overall costs of operation on about the same level as last year, although our turnover has increased.

We are in the process of transferring the ad- ministration to new and spacious offices in Baker Street. Our Head Office organisation had hitherto been housed in seven different offices in various parts of London. Operational control under these con- ditions was naturally not easy. Our work in stream- lining the organisation will be facilitated when the central administration comes together under one roof.

TRIBUTE TO MANUFACTURERS I have, earlier in my speech, expressed my appre- ciation of the invaluable co-operation which we have

enjoyed with our manufacturers over the years. This year, in particular, it is with pleasure that I acknow- ledge the close collaboration which has made it possible for us to move swiftly and effectively in our campaign to lower retail prices. I thank them for their part in the implementation of our policy. It reflects the understanding relationship which exists between us.

In my first speech to the Shareholders of Marks and Spencer as a public company in 1927, I said :— "We purchase in this country practically 90% of our requirements. It is our aim and object to get as much produced in this country as possible, and the efforts of our buyers are constantly being directed to this cardinal principle of our business. This achievement can only be effected by a closer co-operation between the manufacturer and our- selves, by the adaptation of his manufacture to our needs, and by the elimination of unnecessary intermediaries and charges."

We have followed these principles ever since, so that to-day we can state with pride that over 99% of our manufactured goods are still made in this country. This is a high tribute to our manufacturers who, by their skill and experience, have enabled us to bring this policy to fruition.

TRIBUTE TO STAFF It is with pleasure that I pay tribute to the work of the staff. The Board is justly proud of the high quality of service given by members of the Com- pany, and of the fine spirit in which this service is carried out.

Although we attach great importance to a pro- gressive wage policy, we are equally concerned to create a happy working atmosphere throughout the business, and to encourage by every means a genuine sense of belonging, and of fellowship within the organisation.

In the past year we spent over £800,000 on the provision of a wide range of amenities for the well- being of the staff. The cost to the Company works out at £35 for each member, which is, of course, additional to wages. As is well known, these amenities include well-appointed staff quarters, excellent meals at nominal prices, extensive advisory health services, and opportunities for sports and social activities.

We operate two important funds for the benefit of the members of the Company. The Benevolent Fund to which we make an allocation of £150,000 per annum from Profits, and the Pension Scheme which, in the past year, cost the Company £300,000 which is a charge included in the operational ex- penditure. Since the inception of these funds the Company's contribution totals some £3,750,000, made up as to £1,275,000 to the Benevolent Fund, and £2,500,000 to the Pension Scheme.

We thank each and every member of the staff for their loyalty and devotion to the interests of the business.

The report and accounts were adopted.

VOTES OF THANKS Mr. L. Brown (Prudential Assurance Company Limited), in proposing a vote of thanks, said : I count it a privilege to be entrusted for a second time with the pleasant task of proposing a vote of thanks to our chairman and our board of directors. As always, Sir Simon has given us a concise review of the events of the year, concise but interesting and indeed exciting. He has referred to the increased turn- over, larger profits, the continued development of the branches and further plans for development.

Even more profit has been ploughed back to finance that development, after providing for a larger dividend. What more could shareholders ask for? Perhaps the most interesting and most important item from the National point of view is the re- organisation of methods which enabled substantial reductions in prices to be made, thus providing an important contribution to the National problem of keeping down the cost of living and checking in- flation, and also providing an example to other large organisations, including perhaps Government De- partments.

Mr. G. Seebohm seconded the vote of thanks, which was unanimously accorded, and the chairman suit- ably replied.

also given a final dividend warning, COLVILLES has made lower profits for the first half of the year, and DORMAN LONG, hit by the decline in building orders, has had to give notice to 1,100 men. By contrast two companies, benefiting from the motor boom, have increased their interim dividends, namely STEEL COMPANY OF WALES, from 2+ per cent. to 3 per cent., and JOHN SUMMERS, from 4 per cent. to 6 per cent. The first shares at 15s. 9d. (reissued at 20s.) return over 10 per cent., and the second at 23s. 9d. return 11.7 per cent.

Metal Shares

The proposal of the American Government to stockpile copper again was responsible for a rise in the metal price to over £200 a ton and a further rise in the share market. Having recommended a combined 'recovery' purchase of BANCROFT and CHARTERED last February, when the shares were. I ls. 6d. and 43s., I am particularly pleased to see them at 17s. 6d. and 62s. 3d. respectively. With a yield of over 7 per cent. Chartered still seem to be a reasonable purchase. Also SELECTION TRUST, now 80s. to yield 8.55 per cent. Whether the American Government will also be forced to stockpile lead and zinc to help their domestic pro- ducers remains to be seen, but CONSOLIDATED ZINC at 45s. to yield 81 per cent. is another potential recovery stock. The only metal which does not look like having a comeback is tin, where the Russian Government is taking advantage of the international restriction scheme by dumping tin on the open market. How wise were the copper producers to avoid a stabilisation plan and rely on voluntary cuts in output.