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MONEY MATTERS by Martin Younger
Page 106
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Plaxtons feel the deflation package pinch
rE latest half-time report put out by Plaxtons (Scarborough) cilearly shows the gripping adverse effects of the Government's last-July deflation package. For the six months that terminated on February 28, pre-tax profits amounted to £185,187. Comparative figures are not available, the statement points out, but matched against the total of pre-tax profits for the full year that ended on August 31, 1966—£402,209—it is clear that a downturn took place.
As a starting point it is necessary to bear in mind the board's warning that because of seasonal factors (and these fluctuate from year to year) it is difficult to assess figures on what they call a time basis.
During the current year they have found that the delivery of completed coaches has been somewhat later and more concentrated into a shorter period. Compared with a year ago this has meant an increase in cost of production.
But there is little doubt that the "uncertainties and frustration brought about by the Government's credit squeeze" was the principal factor that made planning and management more difficult. The directors state that although profits for the full year will, they believe, be lower than those of a year ago, they consider the results will be very satisfactory in the circumstances.
The board is confident that the dividend will at least be maintained at last year's level of 22-1per cent. Meantime, the price of these 5s. Ordinary shares is around 25s. 9d. At this price the yield is the below-current-average of 4i per cent. But last year's dividend was covered almost 2+ times by earnings and on that basis, and taking account of the high quality of the management, as well as the group's long-term prospects, it is a basis I would be prepared to accept.
In his latest annual review, the chairman of Lancashire United Transport tells his fellow members that by various economies it has been possible to reduce the impact of additional costs. These economies include one-man operation. The board is constantly endeavouring to improve efficiency; more one-man buses are planned to start the middle of this year. But increased fares are a "must"; application has been duly made to the Traffic Commissioners.