Company Notes
MERCANTILE CREDIT increased its volume of business for the year ended September 30, 1961, but not its profits.. These, before tax, slumped from £1,624,007 to £677,995, and the net profit from £602,923 to £194,586. This is an example, common to many HP companies, of very unprofitable trading, a situa- tion which has been aggravated by higher bor- rowing charges and administrative costs. Hire- purchase and other instalment debtors have risen to 'a new peak of £80,349,000, and although ex- ceptional provision has been made for bad and doubtful debts, it still remains to be seen if fur- ther losses will come to light. This is possible on account of the number of cars being rePOssessed and having to be sold on a •depressed second- hand car market. The chairman, • Sir Mark Turner, , gives shareholders a full report and states quite bluntly.that he has no doubt about the long-term profitability of hire purchase, but he cannot honestly say that their troubles are yet at an end. The company has other non-hire- purchase interests in this country, naively, Kingsway and General Property Trust, Mer- cantile Leasing Co. and Mercantile Credit Co. of Ireland, also overseas interests in South and East Africa, the Rhodesian Federation and Toronto. The dividend has been cut from 121 per cent. to 71 per cent. The 5s. ordinary shares at 14s, 3d, x.d. are at an optimistic price for the short view as this 'may not be justified for some time to come on the present low yield and prospects over the next twelve moaths.
Holt Products have had another record year, in spite of the fact that a number of their products are supplied to the motor trade, but they now .manufacture an increasingly wide range of chemical and other items for the industrial markets. Pre-tax profits were 1330,455, an in- crease of £63,663 on last year. The net profit of £159,531 together with the large amount of £213,801 brought forward leaves a surplus of £373,332. The maintained 50 per cent. dividend (covered nearly nine times by earnings) is only payable on the £60,000 2s. ordinary shares, now 38s. 6d., in which there is a narrow market. The holders of the £140,000 2s. !II' shares do not par- tieipate until they convert into ordinary shares, which they do not intend to do until after Sep- tember, 1962. A one-for-two scrip issue is pro- posed on both classes of share. The chairman, Mr. Douglas R. Holt, states that the company is expanding it interests, particularly on the Con- tinent, where there are already subsidiaries in France and Holland. The shares have interest- ing: possibilities for the future, especially as in twelve months' time the capital structure will be more widely based.
• Sterling Estates .suffered a reduction of £30,000 in gross rentals for. the year to September 1961, due. to the sale of certain leasehold properties, but the group income increased to £285,350, which, with income from a sub- sidiary and a surplus of £32,047 from a property sale, makes a total of £319,099. An important announcement by the chairman, Mr. Douglas Overall, is that it is proposed to acquire four small property companies which will bring in a gross rental of approximately £95,000 this year. This, less bank and mortgage interest, may be equal to an increase of 46 per cent. The company specialises in shop and business premises and has a high-class portfolio of tenants (detailed at the end of the re- port). During the past year expenditure on developments at Weston-super-Mare and at Sheffield amounted to nearly £200,000. The re- cent acquisition referred to will increase the issued capital by 25 per cent. There seems to be every reason to expect the 12 per cent. dividend to be maintained on the enlarged capital. The 5s. ordinary shares are a sound purchase at 19s. 6d. to yield 3.1 per cent.
Donnan Long preliminary figures are not nearly as bad as might be expected, for pre-tax profits have fallen by only 9.3 per cent. to £7.74 million and the tax charge is down from 52.5 p,:r cent. to 46.3 per cent. It remains to be seen to what extent the bridge-building ad engineer- ine, sections bolstered up the decline in the profits from the steel side of the business. It is known that there has been a considerable deterioration' in trading profits since mid-1961 and, with fur- ther heavy Capital commitments ahead, a rights issue in the near future seems likely. It does not seem that there is going to be much chance of an increase in the maintained dividend of 10 per cent. for a year or two. The LI ordinary shares at 24s. 6d. yield .8.1 per cent. The full accounts and report are awaited with interest.
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