PHILIP HILL PROSPECTS
The latest accounts of Philip Hill and Partners, covering the fifteen months ended June 3oth, amply confirm the hopeful views I have expressed in recent notes. Net profits, at £643,530, mark a slight advance on the earnings rate for the year ended March 31st, 1938, when the comparable figure was £502,456. The dividend of 311 per cent. actual is equivalent to the previous annual rate of 25 per cent., and is covered by available earnings of over 5o per cent. This is a commendable achievement in a period in which the financial and new issue sections of the business have en- countered unusually difficult conditions and underlines the fact that a very large proportion of revenue represents income from investments. This point and a number of other facts about the balance-sheet position were stressed by Mr. Philip Hill at the annual meeting. Over one-hall of the total profit, he disclosed, was derived from income from investments, and he estimated that this income alone should be sufficient, in the current financial year, to cover the pre- ference dividend and a satisfactory dividend on the ordinary capital.
On the assets side the position is satisfactory enough, always keeping in mind, of course, that this company's port- folio consists very largely of investments in what may be called the Philip Hill group (Beechams Pills, Covent Garden Properties, &c.). At June 3oth the book value of £3,515,377 was £269,826 in excess of market value, but this modest depreciation was covered, with ‘85,00o to spare, by the investment depreciation reserve of £355,434. In addition, general reserve stands at £1,000,000 and dividend equalisa- tion account at £200,000, against a total issued ordinary capital of £1,062,500. At the meeting Mr. Hill left no room for doubt that the investment income prospect is quite bright, and I should also feel hopeful about the financial and new issue sections in anything like a reasonable market atmosphere. Why, then, are the 5 per cent. LI cumulative preference shares quoted as low as 15s. 6d. to yield over 61 per cent., and why do the ordinary 5s. shares at I2S. 6d. yield II per cent.? The answer is, I suppose, because the company's investments are so largely centred in one group and the investor dislikes group financing. I still think, how- ever, that current quotations make generous allowances for the risks.
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