FINANCE AND INVESTMENT
By CUSTOS
RELAPSE followed by recovery is the story just now in the stock markets. Selling is a mere trickle and the buying is by no means aggressive. In consequence, prices are moving sideways and give the impression of having no decided trend. The explanation is, of course, that the main body of investors are now finding some dd. culty in making up their minds whether to push prices higher or to stand aside and await a possible setback. My own view is that the upward movement will be resumed, although on very cautious and increasingly selective lines. Over a fairly wide range of securities, which includes most of the front-rank industrials, quotations are already high enough for the time being, whatever the long-term possibilities may be. The groups which seem to have chances of further appreciation on a worth-while scale are the heavy E.P.T. payers, some of the promising gold shares, and' depressed shares whose recovery potentialities have not yet been demonstrated.
ANGLO-IRANIAN DECISION
Ordinary stockholders in the Anglo-Iranian Oil Company have no reason to be disturbed by the preliminary statement of results for 1943. While it is true that net profits, after taxation, have fallen rather heavily from £7,790,282 to £5,639,122, the board makes it plain that gross earnings surpassed even the bumper figures of 1942 and that the fall in the net figure was attributable entirely to the incidence of Excess Profits Tax. How E.P.T. affects different co
panies is seldom apparent from published profit figures. There an many companies which are paying dividends today which appear to be quite inconsistent with the E.P.T. position. There are others which seem to have been much more severely hit by this too per cent. tax than would have seemed possible in the light of the profit
figures of the standard years. Only the accountants know the whole story and it would be helpful to investors if the position were fully and frankly set out in the chairmen's statements. It will certainly be hoped that Sir William Fraser, the Anglo-Iranian chairman, will explain how it has come about that a further increase in the co pany's gross profits should have been accompanied by such a precip tate fall in retainable earnings. His warning last year that the I retainable figure had been swollen by the E.P.T. deficiencies accum lated since 1939 does not seem to be sufficient in itself to expl the present position.
In deciding to pay a final dividend of 15 per cent., which brill up the total distribution for 1943 to 20 per cent., as in 1942, board has done as much as could reasonably be expected. Ho much has been allocated to reserves is not yet disclosed, but th seems a safe assumption that dividend policy has again been con servative. Moreover, it is apparent that in present conditions gr earnings are running at high levels and the post-war outlook, far as it can be judged, is distinctly promising. Gross profits shou hold up well and with any revision of the tax burden there sho be an appreciable improvement in the net retainable total. Followi the profit and dividend statement the Lx Ordinary units have f from 123s. 9d. to just under £6. The yield is only 31 per cent., the long-term prospects are good enough to suggest that this s is well worth holding.
GREAT UNIVERSAL STORES
While one cannot fail to be impressed by the earning pow demonstrated by Great Universal Stores it is also difficult to very enthusiastic about the finances of this undertaking and subsidiaries. In the latest balance-sheet dated March 3ist, 19 it is disclosed that borrowings have exceeded the authorised amo of £2,000,000 by f,43,000. Another interesting fact which c to light is that the vendors of the Jays and Campbells business, which Great Universal ,paid £1,203,125 in cash, hold an OP to subscribe for 275,000 Ordinary 5s. shares in Great Universal 16s. 6d. each. This option is exercisable at any time. within t years of war ceasing and is, of course, subject to Treasury coo being obtained.
To ease the financial position Great Universal Stores are se powers to raise the authorised capital by £I,000,cro in the form 4,000,000 new 5s. Ordinary shares, and although there is no in tion of issuing any additional capital at present, one effect will to increase the kprrowing powers by Lx,000,000 to £3, Meantime, the group's earning power displays a remarkable restate For the year to March 31st combined trading profits of the gr rose from £722,648 to £889,754, although they included only months' profit from the Jays and Campbells investment. Or dividend has risen from re) to- It per cent., both free of tax, the 5s. Ordinary units are now quoted around 23s. 3d.
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