FINANCIAL NOTES

DEPRESSED MARXETS.

WITH the exception of gilt-edged securities, which have been firm, and the comparative steadiness of Home Railway stocks, depression has been writ large over the Stock markets during the past week. The slump has been most pronounced in Mining shares, commodities and industrial sharei,` and the

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FINANCIAL NOTES

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fall has revealed weak speculative positions with considerable difficulties to be faced in many directions. I deal more fully, however, both with the fall in prices and with the causes responsible, in the article preceding these notes.

THE NATIONAL DEFENCE LOAN.

Notwithstanding the dullness of markets, it must be hoped that a good reception will be given to the National Defence Loan, the main details of which have been announced at the moment of writing. The Loan is for £m0,000,000 in 2 per cents. at the issue price of 991. This would mean a flat yield to the investor of only £2 10S. 3d. per cent. That yield, however, is slightly increased by the fact that it is a comparatively short-dated loan, being redeemable before the end of 1948 by annual drawings at par of not less than 20 per cent. of the amount of the Loan, the first drawing taking place in the autumn of 1944. The average life of the Loan therefore will be a little over nine years, making the average interest yield, allowing for redemption, about £2 IIS. 6d. per cent. Even this is, of course, a small yield for the ordinary investor, but it is likely that the Loan will be acceptable to banking institutions and to certain trustees requiring a short- dated investment. Moreover, the advent of the Loan is also regarded as an indication of the continuation of the policy of cheap money, especially as until the proceeds of the Loan are actually required for rearmament expenditure, they will be used to redeem outstanding Treasury Bills, thus emphasising the easy conditions in the Money Market:

ARMY AND NAVY STORES PROGRESS.

The annual report of the Army and Navy Stores, Limited, fully confirms the favourable impression created by the announcement of a final dividend and bonus, making a total distribution for the year of 15 per cent., against 121 per cent. last year, an impression strengthened, moreover, by the character of Sir Frederick Gascoigne's speech at the annual meeting this week. The gross profit for the year was £704,000 against £660,000 a year ago, while a slight saving in expenses brought the net profit to £189,902 against £148,943. Combined with the increased distribution of profit, however, there has been a continuation of the conservative policy, so that in addition to the repeated allocation of £25,000 to Reserve for Develop- ment and Improvements, the General Reserve has received a further £20,000, and the balance-sheet is a strong one with liquid assets amounting to £2,003,293, including increased investment holdings of £994,919 and cash of £92,890. For some few years past I have commented upon the sound but progressive policy of the management of the Army and Navy Stores, and the results are now being shown in increased profits.

* * * * LONDON AND LANCASHIRE RESULTS.

The latest report of the London and Lancashire Insurance Company is noteworthy for the good underwriting results which are presented. The aggregate underwriting profits for the year were not quite up to the exceptional results for 1935, but they represented 9.6 per cent. of the premium income. In the Fire and Marine sections the results were slightly under the previous year, but in the Accident Department there was a substantially larger profit, namely, £107,000 against £72,700. To the total underwriting profits of £595,126, including £1,379 from fixed-term policies, there is added the Life contri- bution representing one-fifth of the profit accruing from the Law' Union and Rock Life account at the last quinquennial valuation, and with the interest income of £481,953, the total credit to Profit and Loss is £1,094,156. The total Reserves of the Company of all kinds amount to £i x,8z5,roo, exclusive of capital. This figure represents nearly twice the premium income and denotes a strong position.

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SHIPPING RECOVERY.

Many of the Shipping companies are now showing signs of considerable improvement, due in part to the rise in freight rates and in part to the general revival in trade, which has increased passenger as well as goods receipts. The report of the Union-Castle Mail Steamship Company for 1936 is a par- ticularly good one, and the Directors are hoping to be able to deal with the remaining arrears of dividend on the 6 per cent. Preference shares out of the profits of the current year. This fpli-aws upon a reduction of the book value of investments from £2 687,381 to £892,863 by the use of sums from various

Reserves, including the whole of the Reserve Account of £450,000, and all of the Insurance Reserve of £842,521, less £200,000. The profits for the year at £435,828 compare with £329,915 in the previous year. These profits are reached after allowing ordinary depreciation at 5 per cent., but a further sum of £2oo,000 is appropriated from profits as special depreciation in respect of the vessels which are being re-engined to enable them to maintain the accelerated South African service.

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RISE IN PROFITS.

Among the many favourable reports of industrial companies published during the past week, that of Babcock and Wilcox, the boiler makers and engineers, takes a high place. The profit for the twelve months, after deducting contributions to Staff Pension Funds, amounted to £545,677, being the highest for six years and comparing with £480,412 in the previous year. Accordingly, the dividend has been raised from 8 to to per cent. and the sum of Doo,000 is transferred to the Dividend Equalisation Fund, raising it to £400,000. The Directors, however, express the opinion that it is necessary to be conservative in the distribution of profits, for although the volume of trade in the Home and Export markets has improved, the international situation and the restrictions on international trading, due to exchange, as well as the economic conditions prevailing in many countries, have shown little improvement.

* * * * INTERESTING APPOINTMENTS.

During the past two weeks there has been a moderate recovery in the shares of the well-known firm of Raphael Tuck and Sons, Limited, the £i Ordinary and the 51 per cent. Preference shares of £5 each rising to los. and 7os. respectively. The advance followed the announcement that Sir Edgar Waterlow, Chairman and Managing Director of the well-known firm of Messrs. Waterlow and Sons, Limited, together with Mr. V. E. Goodman, a Director of that Company, and Mr. A. E. Owen Jones, who is also connected with Messrs. Waterlows, will become Directors of Raphael Tuck and Sons, Limited, from May ist. Sir Edgar Waterlow has agreed to be Chairman of the Board, while Mr. Gustave Tuck and Mr. Desmond Tuck will be appointed Joint Managing Directors.

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LONDON ASSURANCE.

For the fifth year in succession the London Assurance Company has succeeded in achieving a fresh record in net new Life business, the total for last year being £2,823,869. Life premiums show an increase of £73,026 at £837,456, and the Life Fund has increased by £561,164 to £9,462,193. Moreover, in spite of the increase of 3d. in the Income Tax, the net rate of interest earned on the funds was only Id. lower at £3 17s. 8d. per cent. In the Fire and Accident Department the combined premiums show an increase of £13,400. In the Accident Department the premium income was higher at £1,318,661, but after providing additional reserves on increased income in this section of £66,075, the amount transferred to Profit and Loss was £127,127 against £145,570 last year. The total Profit and Loss balance of £822,723 showed an increase of £164,779 and the dividends again amount to is. 3d. per share for the year.

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AUSTRALIA'S LOAN POLICY.

The many investors in this country who are interested in Australian finance are frequently indebted to the periodical circulars of the Bank of New South Wales, which give helpful information. In the latest circular which has reached me, the writer, after admitting that the borrowing policy of the post-War era may have been foolish and that a public debt of £1,400,000,000 (Australian) may seem large in relation to the population, points out that a young country must have capital, and that as long as the loans are productive they should not be discontinued. The annual loan programme, however, has now been steadily reduced and, apart from some abnormal requirements, it is considered that Australia should be able to finance further progress almost entirely by internal loans. Indeed, the writer expresses the view that only when it is necessary to replenish London balances should the advisability of fresh borrowing in the London market be considered. The Survey also makes some interesting comments upon the question of reducing the burden of Australia's external interest payments by enabling investors in Australia to buy Common- wealth securities abroad and have them transferred at the current rate of exchange. It is considered that this would not increase the total of Australian public debt if the fallacy of identifying the Australian pound with sterling were ruled out.

A. W. K.