COMPANY NOTES
By CUSTOS
THE new account on the Stock Exchange, 4hich will last for three weeks, started on Wednesday, in fine fashion. Even the gilt- edged market turned better. ROLLS-ROYCE were outstanding among a strong industrial section. The sharp rise in 1954 trading profits, which was of the order of 50 per cent., and the raising of the dividend (after the 50 per cent. bonus) from the effective
per cent. to 17+ per cent., caused a sharp advance to 93s.-10s. higher than on Mon- day. The dividend being covered nearly 4+ times, a yield of 3.8,per cent. may not be con- sidered too low for this 'growth' stock. Steel shares were again a rising market and there was greater activity in store shares. GUS 'A,' which closed last week at 46s., went over 50s. The market is hoping that in spite of the hire-purchase restraint on the furniture trade, the dividend will be raised from 60 per cent. to 75 per cent,, which would give a potential yield of 7+ per cent.
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There is a saying in the market that it will always be found wrong to sell MARKS AND SPENCER. But this year the 'A' shares have been as low as 58s. 6d. against a 'high' of 75s. 9d., and at the moment of writing are 67s. 6d. ex dividend. I am not ashamed to have recommended holders to take part of their capital profits from time to time be- cause a dividend yield of (at present) 3+ per cent. is altogether too low for small investors who are not sur-tax payers, especially when War Loan is yielding 4+ per cent. The high quality of its trade and its outstanding management skill have always made Marks and Spencer a unique long-term 'growth' investment, but on the results for the year ending last March the market was disappointed that its rate of growth had not been higher. The net profit after tax and depreciation had jumped from £3 million to nearly £41 million, but the EPL saving had reduced the tax and lower rates of deprecia- tion had been charged. Profits before tax, depreciation and other charges had risen a more modest £11 million, or 12+ per cent.
to £10.9 million. Earnings on the equity work out at 86 per cent. against an ex-EPL equivalent of 68 per cent., and the dividend is raised to 45 per cent. on the doubled capital against an equivalent of 32+- per cent. The intriguing question is the disposal of the huge capital surplus. The properties have been revalued at £221 million, giving a surplus over the book value of £221 million.
Of this. £19.3 million have been credited to capital reserve. No doubt the chairman, Sir Simon Marks, will say at the meeting what he intends to do with this enormous surplus.
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A more remarkable growth in the cloth- ing business is that disclosed by UNITED DRAPERY for the year ended January last. The trading profits, which include twelve months' profits from Prices Trust, have in- creased by no less than 63 per cent. Exclud- ing prices, the United Drapery business enlarged its profits by 22 per cent. Earnings for the holding company amounted to nearly 94 per cent., and dividends have been doubled by maintaining the 50 per, cent. rate on the doubled capital. Expansion is still the order of the day, for the company acquired last November the business of Alexandre Ltd. by an exchange of shares. According to the chairman, Sir Brian Mountain, the effect of the new hire- purchase restrictions has not been severe. So far this year total hire-purchase sales are in advance of 1954/55. The 5s. shares seem reasonably priced at 45s. 6d. to yield 5+ per cent.
A sound industrial investment for the small investor is the 5s. equity share of F. FRANCIS AND SONS, makers of steel drums, metal containers and 'crown' corks. The profit record is impressive. Also the bonus record—the last being 50 per cent. last June. For the year to December last earnings have risen from 42 per cent. to nearly 58 per cent., and the dividend has been raised from an effective 15 per cent. to 20 per cent. At 19s. the 5s, shares return a yield of 5+ percent.
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