Company Notes
By CUSTOS BULLISHNESS in the industrial market received a check this week on the labour unrest and the publication of some disappointing reports. When an industrial company of the importance of TUBE DIVESTMENTS discloses that it has made a loss in its aluminium division and that its profit margins have been narrowed in other branches it certainly causes some anxiety among investors. The full report for the year ending July, 1953, reveals that sales turnover dropped by only 4 per cent. but trading profit (after excluding other income and exceptional profits of the previous year) fell by as much as 27 per cent. The chairman had warned shareholders a year ago that prices and Profits would undergo a severe shake-up before industry became conditioned to a world buyers' market and he does not suggest that the current year will see a return to the boom conditions of 1951-52. But Tube Investments have wisely ploughed back profits into plant investment—they have just bought from the 'Government a steel works for their own steel tube production—and their long-term future seems as assured as their dividind. At 63s. the shares may only yield 4f per cent. on the dividend of 15 per cent. but on earnings they yield nearly 20 per cent.
MARKS AND SPENCER iS perhaps the most popular recommendation among stock- brokers whose clients ask for a " growth stock " offering not an immediately high dividend yield but the prospect of steady capital appreciation through dividend in- creases and bonus distributions. The Com- pany has lived up to its reputation by raising its interim dividend from 15 per cent, to 20 per cent. which seems to indicate that its final in May next year will be raised from 35 per cent. to 40 per cent. at least, making 60 per cent. for the year. If that is correct the yield at the present price of 67s. 6d'. would be £4 8s. per cent. The last capital' bonus was 100 per cent. in June, 1952 and in the three years previous to that the directors distributed fractions over 2 per cent. per annum in " A " ordinary shares; It is certain that the Company is enjoying excellent trade in the current year (ending March, 1954) for national employment and income have been running at higher levels than in 1952. About 75 per cent. of its trade is in clothing and 25 per cent, in food. By offering constantly improving values in its clothing merchandise it is probably still taking trade away from ordinary retail shops, department stores and co-operatives. The turnover of Marks and Spencer in 1952 was no less than £85 millions, which was 16 per cent. above that of the previous year. The Company does not indulge in property deals for the sake of capital profit. Its policy is to improve and modernise its stores —and enlarge its counter space—out of its own resources. It has spent £11 millions in this way since the end of the war. Its proper- ties (mainly freehold) stand in its books at about £9 millions which is far below their present day values ; they therefore represent a big capital reserve. Rental charges in their trading account are based upon the original cost of the property, so that trading profits benefit accordingly. This I am sure, is the only sound way to run a chain store business. For conservative and efficient management I do not think Marks and Spencer can be beaten.
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