Investment Notes
By CUSTOS
A PAUSE in the upward course of the equitY LA share markets is not unwelcome. It gives the investor time to collect his thoughts. It must be clear to him by now that the quick turn-round in profits following on the re-expansion of the economy will be confined to the manufacturing companies whose profit margins and profits dis- appeared under the earlier deflation. Recent examples have been the motor companies, BABCOCK AND WILCOX, REYROLLE, BM, AEI and BRISTOL AEROPLANE, and this week we have had the good recovery estimates from BRITISH ELEC- TRONIC INDUSTRIES. But the investor must not expect quick recoveries in the stores or con- sumer trades, which have not had the benefit of sharp cuts in purchase taxes and have to watt until July before the income tax reliefs begin to help. Mr. Maudling did nothing to help the public into the general shops—only into the motor-car, radio and TV sale-rooms. So the Board of Trade returns for retail trade gener-
ally remain disappointing. The shops' turn will come later in the year, but I do not expect bumper returns from GUS, MARKS AND SPENCER, etc., until 1964. And I cannot see great recovery in bank earnings. The banks have lost business to other financial institutions which have offered higher deposit rates and they have recently been chided by the Governor of the Bank for this lack of competitiveness and for their failure to bring themselves up to date in their hours of business, etc. Certainly banks do not disclose their full earnings, but I would not put them in the Maudling recovery group as some brokers are trying to do.
Aircraft Shares
When I recommended HAWKER SIDDELEY 011 February 22 at 27s. 3d. (now 34s.), I had in- tended to follow up With BRISTOL AEROPLANE ,and must now make good the omission. Bristol Aeroplane is a holding company, its main in- vestments being in Bristol Siddeley Engines (the main provider of the profits) and British Air- craft Corporation. For the year ending Decem- ber, 1962, its profits have already shown a striking recovery, being 37 per cent- up before tax and 30 per cent up after tax. The dividend is raised from 131 per cent to 174 per cent and is now covered by earnings nearly two and a quarter times. There is to be a one-for-three scrip issue and a one-for-three rights issue at I Is. The directors anticipate that 1963 profits will be on such a level as will justify a dividend on the increased capital of not less than 12 per cent, of which 5 per cent will be paid as an interim. The 10s. units have now advanced to 29s. 6d., which is equivalent to an ex-rights price of around 20s., to yield 6 per cent. This is perhaps no higher than it should be for a speculative holding and I would advise any investor takirig an in- terest in aircraft shares to put Hawker Siddcley and Bristol Aeroplane together.
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