Finance—Public and Private
English Railway Results
ALTHOUGH the dividend declarations by English Railway companies have, for the most part, proved equal to expec- tations, the effect upon market values has been negligible, partly owing, no doubt, to the depression affecting other stocks and partly also to the fact that the current year is again proving disappointing in the matter of weekly traffic receipts.
L. M. & S.
Nevertheless, the dividend statements have undoubtedly shown a considerable saving in working expenditure, and this, indeed, has been revealed still more fully by the actual half-yearly Reports. In the case of the London Midland & Scottish, for example, the dividend of 34 per cent., although comparing with 41 per cent. for 1927, was quite equal to market expectations. It meant an actual decline in the amount distributed of just under £1,200,000, but the reduction in gross receipts has been very heavy. Moreover, the amount carried forward has been raised from £59,000 to £159,000, so that it is evident that very substantial economies were effected in outlays.
A CLEAR. STATEMENT.
This favourable impression, which was formed on the dividend statement, is amply confirmed by the full half- yearly report, and, in passing, I should like to congratulate the chairman of the company upon the very clear summary published together with the report, evidently designed to give the stockholders the clearest possible insight into the position. I have often in these columns been compelled to criticize our railroad management on various points, and I am, therefore, the more pleased to be able to chronicle this endeavour on the part of the L.M.S. to take stockholdth fully into confidence. The report shows that expenditure was actually reduced by £2,512,000, against a decline in gross of £3,947,000. Of course, the great fall in revenue inevitably involved an actual increase in the ratio of expenses, which rose from 79 to 79.8 per cent. of the gross receipts. One of the greatest savings in expenditure was about £640,000 under the head of locomotive fuel. Not the least satisfactory point in the report is the indication afforded of the economies achieved being quite as much connected with increased efficiency as with the incidence of lower prices for fuel and materials. A great part of .the saving, says Sir Josiah Stamp, in his memorandum, " represents the further fruition of the improvements which have been in hand for several years and fully justifies the heavy expenditure on renewal and modernization which has been incurred."
GREAT WESTERN.
The Great Western dividend of 5 per cent., against 7 per cent., was a disappointment to the market. It represented a decline in the amount distributed of about £850,000, but in this case also there was a rise in the carry forward from £58,000 to £105,000. The full report, however, showed that as against a fall in the gross revenue of /1,551,000 (including a loss of 1320,000 in gross receipts from docks, harbours, &c.), the net revenue was only down £767,000, working expenses having been reduced by £535,000, the saving being chiefly in locomotive running expenses. In fact, the report revealed quite clearly that, if it had not been for the unfavourable figures as regards docks and harbours, the economies in railway working would have helped the position materially as regards the dividend. Not the least interesting point in the Great Western Report is the fact that the 21 per cent. deduction from directors' fees, salaries, and wages is shown not by way of saving in working expenses, but as a credit direct to net revenue, the amount involved being £180,591.
THE SOUTHERN.
The Southern Railway has made what is quite the best statement of any of the copanies. The traffic returns had shown a gross loss of nearly £700,000 and the company had to face paying a dividend of 5 per cent. on new Preference Stock amounting to £100,000. Nevertheless, and in spite of the great drop in gross revenue, it would seem that the net amount available for distribution was more than £100,000 greater than for the previaiii years Consequently, the company was able to maintain its distribution on the Deferred Stock at the rate of 2 per cent., or the same as for the previous year. The Directors of the Southern Railway are undoubtedly to be con- gratulated upon sound management extending over some years. Moreover, the favourable impression created by the dividend statement was fully borne out by the directors' report, where it is shown that the situation was materially helped by increased revenues from steamboats, docks, and harbours. The company's largest economy was effected in the fuel bill, where the saving was £445,000.
NORTH-EASTERN RESULT.
At the time of writing, the London and North-Eastern report has still to be issued, but the dividend announce- ment has proved fully equal to anticipations. The market had hoped—and the hope has been fulfilled—that the company would succeed in meeting the full dividends on all the Preference charges together with a small payment on the Preferred Ordinary in order to retain the trustee status of its prior-charge issues. What, however, the market had scarcely dared to hope was that these distributions would be made without any encroachment on reserves. That, however, has been accomplished, though the carry forward has been reduced by 113,000, and it must be remembered that, owing to the reduction from 7s. 6d. to 5s. per cent. in the dividend on the Preferred Ordinary, about £50,000 less has been required for distribution.
YIELDS TO INVESTOR.
In the case of all the companies referred to above there was some recovery at first in prices on the dividend announcements, but present prices are a little lower than at the time of the dividend declarations. Even so, the yields to the investor are not great, although the stocks are what is known on the Stock Exchange as " full of dividend." Thus, the investor in London. Midland and Scottish Ordinary at the present price obtains a yield of about 64 per cent., Great Western a yield of under 131 per cent. and Southern Deferred a yield of just under 6k per cent. In the case of Southern Preferred, however, which is a 5 per cent. fixed dividend stock, the return is a distinctly better one at just over
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