LOCK-UP POSSIBILITIES
All this is disappointing, of course, to stockholders of the Cunard Steam Ship Company, the parent concern, which is in arrears with its preference dividends from June, 1931. The parent company itself did well last year, gross earnings actually rising from £355,382 to £359,308, while net profits were £36,238, against £24,517. Once again profits of the subsidiaries, other than Cunard White Star, were "con- siderably in excess" of the dividends paid to the parent, and the company carries a credit at profit and loss of £214,084. If the Cunard White Star subsidiary, whose fortunes are now the dominant factor in the position of the parent com- pany, had made further progress last year, the board of Cunard Steam Ship might now be contemplating a scheme for adjusting the balance-sheet and dealing with the heavy accumulated arrears of Preference dividend. It is only too apparent, however, that the hopes of stockholders in this direction must be postponed. It would obviously be foolish to attempt any valuation of assets for the purpose of passing on earnings to stockholders when the main operating sub- sidiary is not earning its depreciation.
Meantime, the ambitious building programme goes on, with the 'Queen Elizabeth' well on the way to taking her place beside the 'Queen Mary' in the N. Atlantic struggle. What the financial outcome will be it is impossible to tell, but at current prices I would not jettison Cunard Steam Ship preference stocks. Quoted at 28 and 21 respectively, the 5 per cent. first and the 6 per cent second preferences are valued at something considerably less than the net amount of the arrears of dividend. Obviously, the Li ordinary units at 3s., or the equivalent of £15 per £x o0 stock, are relatively much too highly-priced, especially as there is £5,570,241 of ordinary capital ranking behind only £2,500,000 of preference stock. Ordinary stockholders should take the opportunity afforded by Current quotations to switch into the preference stocks. The pick of the two is the first preference at 28.
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