COLVILLES GROUP PROGRESS
It is just a year since I discussed the position of Colyilles, the dominant unit in the Scottish iron and steel trade. I suggested that earnings would expand but that dividend increases would be checked by the necessity of conserving resources in a rapidly growing concern ; hence the conclusion that the £t Ordinary shares were lacking in immediate speculative attraction. What has happened in the mean- time ? The earnings expansion has taken place, and it is very striking. Last year's total profits of the group, at £1,046,130, were 42 per cent. higher than those of 1936.
The distribution policy, however, has also fulfilled expecta- tions in being very conservative. Depreciation allowance has been substantially increased, £150,000 has been put to general reserve, so that, although earnings on the Ordinary capital have risen from ii to 141 per cent., the Ordinary dividend has merely been stepped up from 7 to 8 per cent. The market-price, which a year ago was 26s. 6d., is now 24s. 9d.
I do not wish to imply that today's quotation reflects any disappointment with the results achieved ; the rise in profits is very striking. The lower price is attributable partly to general market conditions and partly to a feeling among speculative investors that in shares of this kind there is now little left to go for in that earnings and dividends are probably around their_ peak. Only a change of sentiment can explain why the shares were yielding 5f per cent. a year ago and are yielding 61 per cent. today. How should they be regarded now ? In my view, as a reasonably satisfactory investment holding, in the light of the group's recent consolidation policy and strong finances, but as having only limited speculative scope. One cannot escape the conclusion that although earning power should be well maintained in current condi- tions, the board is going to keep a tight rein on dividends.
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