COMPANY NOTES
By CUSTOS •
WAITING on Mr. Butler has been the un- happy lot of the industrial share market, but prices went better this week and if the Chancellor's medicine turns out to be less bitter than the City imagines, a further re- covery may follow. There is certainly more resistance in markets now that dividend yields are more generous. Take the case of WALL PAPER MANUFACTURERS. The market was not prepared for the surprising drop in net profits from over £14 million to £1.3 million, but the increase in the dividend from 15 to 20 per cent. (nearly three times covered) allowed a return of 54 per cent. at 71s. 6d. and this brought in buyers. As I write the shares have improved to 73s. The suggestion that the directors are taking a more confident view of the future by rais- ing the dividend seems wide of the mark. It is much more likely that they have raised it before the Chancellor appeals next week for more dividend restraint. As their distri- bution policy has always been very con- servative they could well afford to pay 20 per cent, and still appear 'restrained.' Wall Paper deferred shares have been as high as 84s. 9d. this year and it is a long time since they returned a yield of around 54 per cent. But they are grouped in the building in- dustry, and as the Chancellor is expected to hit this industry hard with his disinfla- tion programme, shares in this category will probably fall to a more generous yield basis. A case in point is BRITISH PLASTER BOARD 10S. shares, which have dropped this year from 23s. 44d. to 17s. 3d. to yield 7.15 per cent. on the dividend of 121 per cent. (twice covered). This rapidly expanded company probably needs a period of con- solidation and reorganisation, but if the management rises to its difficult task the shares should prove to be a profitable in- vestment. Until Mr. Butler speaks I must emphasise their speculative nature.
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Another share which has fallen with the building group is that of CARRIER ENGINEER- ING, although its air-conditioning job is not at all affected by cuts in council building. Eor the year to June this year the profits available for the ordinary shares rose from £170,000 to £210,000 and the dividend of 50 per cent. (covered 2.2 times) was maintained on capital increased by a 20 per cent. bonus. At 45s. the 5s. shares return 52 per cent., a welcome change from the 41 per cent. yield which they offered not so long ago. On any further fall they would be attractive. So would LONDON BRICK, which al 60s. yield 5.8 per cent. 00 dividends of 171 per cent, which were last covered twice by consolidated earnings.
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The Motor Show opens at a good time for the motor .salesman and a bad time for the shareholder. The fear that the Chancel- !or may increase the purchase tax on cars should make the salesman more persuasive and the shareholders more nervous. The motor industry is in the middle of a large expansion programme and if this is to be fruitful for the shareholders sales must rise, not drop. But home sales are peculiarlY sensitive to taxation and export sales We competition. In the first eight months 0' this year we have sold 22,000 fewer ears in Sweden, Canada and the USA, where competition has been keenest, than in the corresponding period of 1954. And from now on Australia and New Zealand, our best overseas customers, are planningto cat their imports of completed cars by 37,000 in a year. This prospect does not encourage, investment in motor shares, Sb, in spite 01 an excellent report—with sales of cars uf, by a third, trading profits up by a half any 'net profits doubled—STANDARD MOTORS ,S; shares have dropped to 9s. l,d. to yield 04 per cent, on the unchanged dividend of 1- per cent. This company is perhaps more vulnerable to a higher purchase tax that' others, seeing that it has been more sue' cessful in the home market than with 0,, ports. If I had to choose beween the `big five' groups. of the British industry for all investment I would pick BRITISH M01.°1,! CORPORATION, which has yet to experienc' all the economies resulting from the, amalgamation of the Austin works a' Longbridge, the Morris works at Oxford. Abingdon and Birmingham, and the Fisher and Ludlow plant at Birmingham.' The e00" centration of engine production at long" bridge made possible a weekly output 0' 8,000 engines from less space than half that ligure.had required three years earlier. Old' put: has now been increased to more than the 10,000 vehicles forecast for the spring. The total output for this year should be 01 least a third higher than last year. BMC als° has a large assembly plant in Australia sO that it will escape the worst cuts in 0;11 market. BMC Ss. shares at 10s. 3d. 5.4 per cent. on the equivalent dividend, of 11.1 per cent. or 5.6 per cent, if the &NI' dend is rounded off at only 114 per cent. They touched nearly 14s. this year.
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