COMPANY MEETING

THE UNION-CASTLE MAIL STEAM- SHIP COMPANY

DIVIDEND IN SIGHT FOR ORDINARY STOCKHOLDERS MR. ROBERTSON F. GIBS'S STATEMENT THE meeting of the Union-Castle Mail Steamship Co., Ltd., was held on April 26th at Southern House, Cannon Street, London, E.C.

Mr. Robertson F. Gibb, chairman of the company, in the course of his speech, said : I would draw your attention to the moderate increase shown in the amount of profit on completed voyages, after due provision has been made for depreciation on the fleet and on property and plant, for taxation administration and other expenses, and after allowing for certain special outlays—in the case of the two mail vessels whose repowering was completed in 1937—for altera- tions and renovations additional to the main re-engirung contract, which special outlays were, in the opinion of the board, properly chargeable against revenue.

To this profit on completed voyages of £5 to,000 has to be added the income from investments and properties, amounting to £11o,000. The decrease in this figure of a little over £ro,000 compared with the previous year is accounted for mainly by a rather smaller return from some of our investments in subsidiary or associated companies in South and East Africa.

From the total of these two items, amounting to £620,000, have to be deducted interest on loans and on debenture stock and directors' fees, which together come to £173,000, leaving a net profit of £447,00o, or £1 t,000 more than in 1936. The increase of £14,000 for interest charges is due of course, to the larger amount of advances in respect of shipbuilding and re-engining during the year.

After adding the balance of £149,000 brought forward, the total available for allocation is £596,000.

At our meeting last year I indicated the board's hope to be able to deal with the arrears of dividend on the 6 per cent, preference shares out of the profits for that year. This expectation was fulfilled by the payment on December 31st last of the eighteen months' arrears of preference dividend, together with the six months' dividend then due.

These arrears, together with the dividend for the year on the 6 per cent. and 4i per cent. preference shares, absorbed £295,00o, leaving a balance of £3o1,000.

Here I think it desirable that I should reiterate the explanation I gave last year regarding the book loss unavoidably associated with our re-engining programme. The total amount of book loss involved is approximately £435,000, and it was obviously necessary that this loss should be dealt with. For this purpose £zoo,000 was set aside in the 1936 accounts, and in the accounts before you today we have made provision for the balance of £235,000. This latter sum has been 'found by allocating £T5o,000 from the profit and loss account and by transferring £85,00o from insurance reserves. A Credit balance of £151,000 remains in the profit and loss account; Which we recommend should be carried forward.

: Incidentally, I may mention that all our subsidiary companies continue to show a net profit.

BALANCE-SHEET FEATURES

. As regards the balance-sheet, there are not many items calling for special comment. On the assets side of the balance-sheet you Will observe that the book value of the fleet has increased by rather. more than .£1,600,000, and now stands at £ro,135,00o, -which sum includes expenditure on vessels under construction and being re-engined. You will observe from the report that there is a credit balance of £136,842, representing the difference between book values and amounts realised in respect of investment* sold and tonnage disposed of. This has been applied towards writing down the cost of the two refrigerated cargo vessels now tinder construction: The value of our investments appears in the balance-sheet at £566,000, compared with £893,000. This decrease is mainly accounted for by the sale during the year of our holding of shares in the Durban Navigation Collieries, Ltd. Owing to the fact that all our newer vessels consume oil fuel and our coal requirements are now com- paratively small, it was thought 'expedient to take advantage of a 'favourable opportunity of disposing of this asset:

FINANCIAL POLICY -

I think you will agree that, on the whole, the accounts before you reveal a reasonably satisfactory stateof affairs,- and that the company is in a much sounder position today than it was six or seven year ago. You will naturally expect me to give some indication as to the prospect of our resuming the Payment of dividends on our Ordinary, tock, which has not been possible-since the payment made in respect pf the year 1929. With regard to this, I may say.that it is the hope of the board, if present conditions continue, to be able to pay a moderate dividend on the Ordinary stock out of the profits of the current year. At the same time, the board intends steadily to pursue a sound financial policy, and with this object in view it will be necessary to establish had build up reserves appropriate to a company of this standing.

SHIPBUILDING AND RE-ENGINING PROGRAMME

Our shipbuilding programme is continuing to make good progress, During 1937 we took delivery of the cargo motor vessels Rochester Castle and 'Roxburgh rastle,' which are refrigerated throughout, and ;se engaged in the conveyance of fruit and other perishable pr-o:- duce from South Africa to this country. The two further vessels of the same type-ndiv udder construction are expected to be cOmpleted towards the end of this year.

In September last our newest mail vessel, the Capetown Castle,' was launched at Belfast by the Mayoress of Capitown atavery inter- esting and memorable ceremony and was delivered to us at the end of March. She is due to .sail from Southampton on her maiden voyage next Friday, and.as the largest and finest vessel employed in the South African trade, we feel confident that she will prove very popular with the travelling public. While similar in most respect, to the' Stirling Castle' and 'Athlone Castle,' she is 1,500 tons larger and embodies a number of improvements upon those fine vessels.

Work on the two intermediate vessels which we ordered at the beginning of last year is now well advanced, and the first 'of these ships is' due to be launched shortly and to be delivered in-November: We are expecting the second-vessel to be completed in March of next year.

Satisfactory progress is also being made with the repowering programme.

With the delivery of the Capetown Castle,' we have now received ten of the fourteen new vessels ordered Since the commencement of 1934. As I mentioned last year, these .ten vessels were all ordered before the great rise in shipbuilding costs began. On the other hand, the four vessels now under construction are costing us considerably more, and We shall naturally be reluctant to place further orders until prices fall.

THE FLEET However, even if we do not embark upon further shipbuilding just yet, we shall be able in the course of the next twelve months to dispose of a number of our older ships which have served us very well, and thereafter our various services will be carried on almost entirely with modern tonnage. In the meantime, we have continued to keep all the units of our fleet up to a high standard of efficiency. Unfortunately, two of our vessels were involved in serious accidents last year, although I am glad to say that in neither case was there any loss of life or serious injury.

SERVICES

Our mail, intermediate, East African and cargo services were all regularly maintained throughout the year. The 'Stirling Castle,' 'Athlone Castle," Arundel Castle' and 'Windsor Castle' are now performing the mail voyage to Capetown in thirteen and a half days, as Of course, will the CapetoWn Castle' when she sails on Friday. A; I have indicated, the remaining three mail vessels that are being re-engined are expected to be re-delivered to us in the course of the next few months, and by the end of the year we expect to have the accelerated mail service in full operation. The service will then be maintained by eight vessels instead of by nine as hitherto.

As our re-engining programme is completed, the Dunyegan Castle' and Dunnottar Castle' which have been temporarily engaged in the mail service will return to the intermediate service, for which they were originally built. They will shortly afterwards be joined by the two fine new intermediate vessels now building, thus enabling us to effect important improvements in our intermediate and East African services. While our' passenger traffic last year as a whole might be regarded as satisfactory, seeing that our total earnings from this source showed a -moderate increase over the figures for 1936, the results were a little disappointing in view of the fact that it was generally anticipated that the Coronation celebrations would attract ranch larger numbers of visitors from the Dciminions to this country. Perhaps the most gratifying feature in connexion with our passenger traffic last year was a small but none the less welcome increase in our earnings both outwards and_ homewards in respect of our East African service. Our passenger earnings along the African coast also showed some increase.-

CARGO TRAFFIC

The total volume of cargo moving from South Africa last year was considerably in excess of that in previous years, due principally to record shipments of manganese ore to the Continent, and to the large exportable surpluses of sugar and maize. Seeing that rates of freight generally throughout the world attained a higher level in 1937, although they have since receded, it might be thought that we and the other lines engaged in the South African trade must have had a yery.good year so far as the _cargo side of our business is concerned. There were, however, several factors which Prevented us from benefiting from these conditions. -The lines were under 'contract to lift it great proportion of the cargo' to which I have referred-at low rates of freight. Moreover, as the terms of our agree- ment, with the South- African Government restrict us severely in regard to our rates of freight on most of the commodities we carry, whether out or home; the general rise iii freights did not benefit us materially.- . THE FRUIT TRAFFIC As in previous years we conveyed from South Africa large quantitie, of perishable produce, especially fruit.- This company has been associated with the development of the South African fruit industry since its inception and has taken the leading part in providing facilitie, for the "overseas transit under refrigeration of the various kinds of fruit exported from the Union. Unfortunately, there has been a fail in the prices realised for South African fruit in the overseas market', which we hope will prove to be of a temporary nature, and it has bun suggested that the rates of freight shOuld -be. drastically reduced to meet the position of the fruit farmers. While willing and anxious to do all we can to assist, we cantiOt, of course, contemplate undertak- ing this costly form of transport on an untconomie basis. In the American-South Africa trade it was found practicable last year to bring into operation a general increase in the rates of freight and, although-the year's working in respect of this particular service ag.nn resulted in a loss, this was less than that sustained in the previous yor• The report and accounts were unanimously adopted.