Management matters
Page 66
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continued from page 63 and salaries. Pre-tax profits as a percentage of sales have averaged 15.6 per cent between 1970 and 1975, though trading margins have been considerably higher (see graph 2). United Carriers is typical of express carriers in being very labour intensive and employs nearly 2,000 people ; during 1973-74, the wage bill shot up by over 30 per cent and this had a major impact on margins. It is not surprising, therefore, that net margins dropped below 12 per cent during 1974-75 following the high rate of cost inflation.
Despite these problems, United Carriers has maintained a high return on capital which has been over 30 per cent during the past year and, to some extent, this has counterbalanced the fall in the level of margins. Turnover as •a ,ratio to capital employed has also been satisfactory and the management has been conscious of the importance of utilising the company's resources to the full in these difficult times.
It is not easy to make any precise forecast for the short term, because the trend in earnings for United Carriers is related to the level of activity in the economy. It is encouraging, however, that the directors decided to raise the interim dividend by the maximum allowable ; at the time of the interim results, the dividend was increased from 0.525 pence (net) per share to 0.560.
The directors themselves said that it was difficult to make any forecast at this stage owing to the economic uncertainties facing the country. It is likely, however, that United Carriers will maintain a good growth record over the next few years and will benefit from its strong cash position at the moment.
On the stock market, United Carriers has attracted some attention and its price • (about 28p) has made a strong recovery ; in fact, it has more than trebled in value during 1975. Furthermore, United Carriers has an effective management and is in a good position to take advantage of any upswing which may occur in the economy over the next 12 to 18 months.