COMPANY NOTES
By CUSTOS THE local authorities were not slow to take advantage of the lower Bank rate. Hull and Swan- sea are raising £3 million each this week in 51 per cent. stock 1976-78 at 98. The recent heavy demand for the 6 per cent. issues, which I have constantly advised investors to buy while they could on a 6 per cent. yield basis, had prepared the way for these lower coupons, the yield on which is £5 17s. 3d. per cent. The gilt-edged market seems to be taking them in its stride and is quietly beginning to discount the next reduc- tion in Bank rate, which is expected to be 2 per cent. to 51 per cent. The Governor of the Bank, speaking recently at a trade dinner, said that 'the authorities must not allow themselves to be inhibited by psychological fears from moving the rate downwards when a decrease is justified on merits.' Whatever that cryptic remark may have meant, the market is more confident and is look- ing to the Budget for its next point of support. The latest Treasury bulletin encouraged optimism, being loud in praise of our industrial achieve- ments. It might have added that while we. are a first-class industrial power we are still running a third-class financial system.
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My recommendation of chemical shares last week was made before the dividend announce- ment of IMPERIAL CHEMICAL. The 2-point rise to 12 per cent. was 1 per cent. more than the market anticipated and the 50 per cent. scrip bonus was quite unexpected. The increase in sales-64 per cent.—was maintained in the second half of the year, profit margins were only slightly narrowed and the increase in net profits amounted to 9 per cent. Equity earnings worked out at 31 per cent., covering the new dividend over 21 times. The shares rose 3s. to 43s. 6d. and on this basis yield over 51 per cent., which is still, I think, attrac- tive. Another excellent dividend and bonus an- nouncement came from the BEECHAM group- one-for-one in shares and a final of 9 per cent. on the increased capital, making a total of 40 per cent. against 321 per cent. The shares rose 3s. to 32s. 9d., at which they yield nearly 6 per cent. Beecham's have obviously been getting good sales results from their TV advertising, which was heavy enough to account for 25 per cent, of the total TV advertising revenue in the six months to September last. It cost them £1,150,000.
* * At this pre-Budget season of the year it is usual to hear of cinemas being closed and film Productions cancelled. This is done to impress the Chancellor with the trade need to abolish the entertainments tax, but this year the Government Is not averse to seeing a much smaller cinema industry. The ABC group has just closed down eight more cinemas, which, if it lessens the fall in profits, must be a 'bull' point. The parent corn-
patty--ASSOCIATED PICTURESHS, how- evir, in the fortunate position where the rise in its profits from television much more than offsets the fall in its profits from cinemas. It is providing the weekend ITV programmes for the Midlands, Lancashire and Yorkshire and for the first year to March, 1957, a gross revenue of £3 million pro- duced only a profit of £300,000. But for the year ending March, 1958, its gross television revenue is estimated at 5.8 million and its net profit at £2 million. This would be equivalent to nearly 65 per cent. on the ABP equity. Even if the cinema earn- ings fell to 20 per cent. this would give total earn- ings of 85 per cent., so that the 5s. shares at 19s. would give an earnings yield of 22 per cent. com- pared with a current dividend yield of 51 per cent. In another two years its earnings from ITV are estimated to rise by 50 per cent. These calculations I take from an expert and well-produced report issued by a leading firm of brokers. If the BBC estimate of 12 million television sets by 1962 is correct (representing a viewing audience of 36 million) these calculations would be constructive. For the time being ABP shares, after their steep die from a low' last year of 9s., seem to be high enough, but on the showing of this broker's report they are still the cheapest way of buying an invest- ment in ITV.
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