FINANCE AND INVESTMENT
By CUSTOS
FEW people would have predicted that within a fortnight of Sit Stafford Cripps succeeding Mr. Dalton we should have a firm market in home industrial Ordinary shares and falling prices for gilt-edged, Nor is it easy to explain this remarkable contrast in market behaviour on rational lines. In part the tumble in gilt-edged prices is the result of technical influences. Speculators in the long-dated stocks were badly over-bought, and their discomfiture has been hastened and accentuated by " bear " selling. It still remains to answer the ques- tion why investment support has not been forthcoming. Apparently the view is gaining ground that the new Chancellor of the Exchequer will not countenance the creation of fresh credit to enable the .V.reasury to raise gilt-edged prices. As a corollary of that view, many believe that the market will not find a healthy level at anything more favourable to the Government than a long-term borrowing rate of 3 per cent. On that assumption they predict that a 3 per cent. and not a 21 per cent. long-dated stock will be issued on January 1st as the compensation medium to home railway investors. Frankly, I
find it difficult to read Sir Stafford Cripps' mind, but I hope he is realist enough to avoid fixing yet another unattainable target which will involve him in fresh trouble in Throgmcrton Street. Better by far accept the verdict of the general body of investors and consoli- date the market around 3 per cent., a rate which would command widespread support.
MR. RANK'S FILM DEAL
Few people would dispute that Mr. J. Arthur Rank has done and is still doing useful service to the British film industry. It is the greater pity that he should have seen fit to announce a financial deal involving something over kt,000,000, in which he himself is largely interested, in such brief terms as to excite critical comment in the City. The deal in question concerns the purchase on behalf of Odeon Theatres, which is a public company, of shares in the General Cinema Finance Corporation, a private company in which Mr. Rank is the principal shareholder. The object of the deal, as explained in the original announcement, is to streamline the interests of the Rank organisation in the exhibiting and producing sides of the industry. What has upset many shareholders in Odeon Theatres is the lack of information as to the price paid for this investment and the implica- tion which the deal carries that Odeon Theatres, hitherto engaged in the exhibiting and more stable side of the cinema industry, will now interest itself substantially in the more speculative business of film production and distribution.
In his reply to critics Mr. Rank points out that he is selling his shares in General Cinema Finance at the price he paid for them, but that is scarcely an effective rejoinder to the argument that in his own interest the full financial details of the deal should be disclosed. He also justifies his decision to take Odeon Theatres into the pro- duction side of the business by reference to his speech to share- holders in 1944. He then emphasised the advantages of a link-up between producing and exhibiting interests. Obviously Mr. Rank, who should be in a position to know, is convinced that Odeon Theatres will benefit from the step now being taken. This seems to me to provide all the more justification for the criticism levelled by certain shareholders that the whole position should have been explained at special meetings.
A YIELD OF 11 PER CENT.
Investors on the look out for shares which after the recent set-back are giving a high yield and which should now have some prospect of recovery might consider the Is. Ordinaries of the International Twist Drill Company, standing around Ifs. 3d. A few months ago the market quotation was around 15s. 6d. and in August a new issue in the ratio of one share for every two held was made at los. 6d. This is an old-established concern, manufacturing twist drills, cutters and other precision tools. Last year it extended its business by acquiring the Pickford Tool Company, and it was to provide fresh working capital to finance the expanding business of this subsidiary that the new issue was made tree months ago. For 1946 consolidated trading profit amounted to £83,088 and a dividend of 125 per cent. was Con- sistent with the payment of £29,156 in E.P.T. and with the transfer of £to,000 to reserve. For the current year two interim dividends, amounting together to too per cent., have already been paid, and it is confidently forecast that the total distribution will be at least t25 per cent. on the enlarged capital. On this basis the shares at Its. 3d. ire offering the generous yield of It per cent.
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