FINANCE AND INVESTMENT
By CUSTOS
AFTER last month's rise in equities gilt-edged are again making the running in Throgmorton Street. Greek successes have pro- vided the political background, and pressure of money has done the rest. So, in spite of air bombardment and serious losses of merchant shipping, we have the 31 per cent. War Loan standing at a new war-time peak of just under 103. This is all very encouraging, so far as it goes, but it provides no justification whatever for complacency about the nation's finances. Savers, large and small, have achieved wonders in the first year of the campaign, but even higher figures will have to be reached in face of still heavier taxation.
A bit at a time the community is being compelled to reduce its standard of living, a process which will have to go a good deal farther if a growing war effort is to be kept going without inflation. It is partly a realisation of this truth which explains why certain groups of equities are showing signs of uncertainty. Drastic restrictions on civilian consumption must mean casualties in the commercial share list. The other reason why, for the moment, the investor seems to have lost his appetite for equities is, I think, the switching of the activities of the Luftwaffe to the industrial centres. So far, one has detected practically no reac- tions of concentrated bombing of industrial targets in. Stock Exchange prices. This means, of course, that there has been no selling. Whether one can also assume that the damage wrought has been so small as to be negligible from the standpoint of earnings and dividends it is too early to judge.
RALEIGH CYCLE RECORD
One has only to look around to see that cycle manufacturers are doing good business. There will be no surprise, therefore, that the Raleigh Cycle group reports record profits. For the year to August loth the operating company made profits, after providing for E.P.T. and contingencies, of £86,513, against £513,983. Net profit, after charging £108,684, against £82,910, for depreciation, rose from £430,163 to £471,035, with the result that it was possible to pay a rather larger tax free dividend to the holding company. Raleigh Cycle Holdings, in which the investor is directly interested, has, in turn, been able to raise its ordinary distribution from 20 to 25 per cent.
What of the outlook? On the demand side it is obviously good. The trouble is in obtaining adequate supplies of materials. Already, the report tells us, it has been necessary to ration customers. Uncertainties arising from the materials side are reflected in the high yield on Raleigh Cycle Holdings £i ordinary shares. The price is 51s. 3d. and the yield on the 25 per cent. dividend nearly io per cent. Such a generous return makes very adequate allowance for the risks.
TRINIDAD LEASEHOLDS PROFITS
Oil shares have been among the many disappointments as a war-time hedge. Companies like Shell, with large Continental interests, have been badly hit by Hitler's conquests, and even those concerns whose assets have been immune from enemy action have failed to make the profits most people expected. Regarded purely from the standpoint of earnings, the latest results of Trinidad Leaseholds go some way towards restoring the investor's faith in the oil position. Oil profits and other revenue for the year to June 30th rose from £901,779 to £1,511,659, an increase of 68 per cent., due mainly to a consider- ably larger turnover resulting from the disposal of stocks held in this country at the outbreak of war. This easily establishes a new high record of earnings, the previous peak being the £1,090,940 for the year to June 30th, 1937.
So far, so good. The rub is the taxation charge, which is up from £350,000 to Lx,000,000, or just about the equivalent of the rise in profits. Ordinary shareholders again get 15 per cent., and after allowing £69,018, against £19,677, for reserve against investments, &c., the board is carrying forward £120,049, against £128,003 brought in. At 65s. Leaseholds £i shares yield about 4i- per cent. This seems to me a very fair valuation for the present.
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