FINANCE AND INVESTMENT
By CUSTOS ALTHOUGH there are differences in emphasis, the bank chairmen's statements this year show a remarkable parallelism in their approach to the nation's economic and financial problems. All agree that last year witnessed the beginning of an ordered improvement on the right lines ; all are at pains to point out that disinflation has not gone far enough and all emphasise the need for a substantial increase in productivity. Those views find wide acceptance in the City but when one looks for really constructive proposals they are not easy to find. Most of the bankers recognise the dilemma of disinflation policy and incentives, but they do not suggest how it is to be resolved. Lower taxation would help, and so would the removal of vexatious controls but is it really practical to base hopes of tax remissions on heavy reductions in Government expenditure ? What if re- armament outlays have to be increased ? Lord Balfour of Burleigh, the chairman of Lloyds Bank, frankly faces up to his problems by hinting at the benefits of a little more unemployment and a moderate stiffening of interest rates. But I doubt whether the Government will be willing to take a leaf from this book.
DEAL THAT FELL THROUGH
Directors of public companies which become involved in nego- tiations- whose outcome is liable to have an appreciable effect on the value of the shares are often placed in an embarrassing position. A public announcement that negotiations are in progress is liable to stir up speculative activity on the Stock Exchange; on the other hand, silence may result in shareholders parting with their holdings at prices which subsequently prove to be less than the real worth of the shares. An illustration of the unfortunate consequences which can arise when negotiations disclosed by directors fail to result in a deal has been afforded this week by Criterion Restaurants. Here a purchase bid of £1,35o,00o, which if it had materialised would have given the 5s. Ordinary shares a value of about 22S„ was withdrawn at the last minute. When the board disclosed that discussions were in progress and advised shareholders not to sell, the market quotation was around iss. 9d. It had risen to that level from just under Tos. in the preceding five weeks. Following the board's announcement, the price rose to as. but has now collapsed
LO I Is.
From the shareholders' point of view it can be said that they are in no worse position than before the negotiations started and it is difficult to see how the board could have acted very differently from the way in which they did, except perhaps that they might have worded their announcement in more cautious terms. What has caused comment in the City has been the obviously inspired buying of the shares between los. and iss., followed by equally obviously inspired selling when the price was around 17s. It is clear that both the news of the coming bid and subsequently of the impending withdrawal of the bid was well known to certain people. It is difficult all the same to see what useful purpose any Stock Exchange enquiry into these share dealings could serve.
A SHARE FOR RECOVERY
In dull market conditions the us. Ordinary shares of the Lancashire Handbag Company, which were introduced to the London market around 13s. 6d. in 1947, have fallen back and are now quoted around 9s. 3d. This setback is not justified by any deterioration in the company's trading. In 1947 profits were well maintained above the average level of the preceding uo years, and I shall be surprised if the 1948 results, due in a few weeks' time, do not make a distinctly satisfactory showing. Already an interim of 3o per cent, has been paid and it is confidently expected that this will be brought up to a total of 8o per cent. with a 5o per cent. final. On that assumption the shares at the present price will be offering a yield of just under 9 per cent., which seems unduly generour. in view of the company's past record and its strong balance-sheet. In pre-war years good profits were earned, and the company now has the benefit once again of the use of one of its factories which was requisitioned during the war. The company manufactures ladies' handbags by mass- production methods, and its principal customer is Marks and Spencer, with whom it has long had close and friendly relations. The balance-sheet shows fixed assets at just under E15o,000, equivalent to 5s. a share, and net liquid assets which include over L100,000 in cash and gilt-edged stocks, equivalent to a further 4s. 3d. The coming results and dividend should justify a better price than today's quotation.
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