FINANCE AND INVESTMENT
By CUSTOS
WELL prepared for a mark-time Budget the City has taken kindly to Sir John Anderson's statement. Only the blither type of optimist is' disappointed at the postponement of E.P.T. revision. The more discerning are rightly impressed, by the emphasis laid on the probability of a further Budget before next April, the urgency of a revival of export trade and on the need for a substantial reduction of taxation as soon as conditions return in which normal business incentives have to be preserved. Whether the next Budget is likely to be brought in by a Conservative or a Labour Government I must leave investors to decide for themselves, It is plain enough that if Sir John Anderson remains in the saddle at 'Whitehall he is 'deter- mined—within the limits set by the inflation risk and political ex- pediency—to reduce or abolish E.P.T., lower the standard rate of income-tax and give industry real encouragement to get on with its task of post-war re-equipment and recovery of markets.
• DOUBLE TAX REFORM Against this background it is not surprising that stock markets have again taken the hit between their teeth and moved forward. While gilt-edged and other fixed-interest securities have found renewed strength in the Budget re-affirmation of the virtues of cheap money, the main emphasis in the market is on Ordinary shares, especially those which stand to benefit substantially from a cut in E.P.T. Towards the end of last year I reviewed the position of several of the smaller companies whose dividend possibilities would be greatly improved if E.P.T. were reduced or abolished. Among them were Purnell (printers), Sanbra (sanitary engineers), Cementation (con- structional), whose Ordinary shares have all improved in price in recent months. These shares are still worth considering, however, for the long view.
Another group which has benefited from the Budget speech. is what may be called double-taxation shares, which include Borax Consolidated, Canadian Eagle, English Sewing Cotton Selection Trust, Olympic Portland Cement and a large number of others which have been hit by the levying of tax in two countries on the same income. At long last this inequitable position, which has imposed severe handicaps on overseas trade is to be removed as between the United Kingdom and the United States, and negotiations with Empire countries are to be started.
SELFRIDGE GROUP PROSPECTS
Having called attention last year to the £i Cumulative Preferred Ordinary shares of Selfridge (Holdings) when they were standing well under par, I am impressed by the improvement in the group's position disclosed in the latest accounts. The Holdings company, in which the investing public is directly interested, draws its revenue from its investment of Li,000,000 in the Ordinary shares of Selfridges Limited, the operating concern. For the year to January 31st, 1945, the operating company's profits- were slightly -down at £312,089, against £338,674, but after providing for taxation the I2f per cent. dividend, which is transferred to the Holding company, was com- fortably maintained, leaving £46,744 to be carried forward, against £22,155 brought in.
The Holding company has to apply specified proportions of its income to the redemption of "A" and "B" Secured stocks, but it is noteworthy that the outstanding balance of the "A" stock is now reduced to £3,596. In his review the chairman points -out that once this " A " stock is out of the .way the proportion of income available for stockholders will be considerably increased. With this prospect in view, and having regard to the balance of £69,154 now carried forward, the directors are examining the whole position with a view to formulating a scheme to deal with the large accumulation of arrears of Preference dividends. On the 6 per cent. Cumulative Preference stock (tax free up to 6s. in the pound) arrears date back to April 1st, 1939. On the to per cent. Cumulative Preferred Ordinaries nothing has been paid since October ist, 1938. The net amounts involved, however, are by no means overwhelming in rela- tion to the income which may well be derived from the operating company in more prosperous times. Quoted around 25s. 6d., the to per cent. Cumulative Li Preferred Ordinaries, carrying nearly seven years' arrears, equal to 7s. net a share, still look-a promising lock-up speculation. When the time comes to submit the promised reorganisation plan, holders of these shares should get. tarns which will justify a substantially higher price.
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