Market report
CUSTOS
The pace was too hot to hold; and the stock market has been falling back from the record levels attained last week. The Financial Times index, 442 at the close of business on 29 March, then lost nine points in two days. Wall Street's peace boom found no response in London.
Plessey is to raise £27 million by means of a rights issue. It is joining with ICY and English Electric, in the new monolith International Computers, and needs the money to finance its stake. New equity capital raised during the whole of last year amounted to less than three times what Plessey is now asking for. If we are now to see more rights issues and fewer loans, it will do something to relieve the stock shortage which has played so large a part in pushing equity prices to their present levels.
A point may now have been reached—some observers thought it had been reached months ago—when it pays more companies than Plessey to make rights issues, rather than bear the very high rates of interest now needed for loan stock. This would be a check on equity shares and a stimulant for gilt-edged. All the same, the placing of £11 million of William Press shares in a couple of hours shows how keen the demand for good-class equities still is.
Bank shares remain firm, with Barclays now up to 81s 9d. Golds have been on offer, with a particularly bad day on Monday: the Fr gold mines index has fallen 8 per cent in a week. Government stocks were helped by the com- muniqud from the Group of Ten meeting and the March gold figures—a published loss of £20 million to the reserves—were rightly treated as meaningless. War Loan is almost up to half its par value. John Bull pleads guilty to selling Rolls-Royce too soon. He was not the only one: the market in general, as I reported last week, thought that Rolls would miss the air-bus engine order. Even so, the shares, which rose lOs when the news came, lost half that as investors realised that the order would take a lot of financing and would not contribute to profits for some years. The additional order from Delta Airlines then took the shares up from 49s 9d to 51s.
Company notes
Sir Owen Wansbrough-Jones's first report from the chair of Albright and Wilson tells of a year of reorganisation (on lines charted by McKinsey's) and heavy capital expenditure. Although the current year's accounts will bene- fit, Sir Owen foresees that the full weight will not be felt until 1969. However, for 1968 he confidently expects an improvement in earnings.
At Bowater, Sir Christopher Chancellor feels it unoriginal to call 1967 a year of trials and uncertainties. The pulp and paper industry has had its private troubles: there has been a pause in the growth of demand, and Sir Christopher calls Bowater's second-half figures disappointing. The lower profit (despite the effects of devaluation on overseas earnings) would have meant that, at the previous dividend rate, retentions would be only £747,000, which the board considers too little. Sir Christopher is chary of forecasting, but he says that he expects devaluation to work broadly to the company's advantage.
The board of Scottish Machine Tool has deferred the question of dividend distribution until the audited results for the year to 31 March are available to show the full extent of the second-half recovery.
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