ERF profits rise much as directors anticipated
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INVESTORS who bought ERF shares on hopes of a lifting of the A distribution have been disappointed. Because for the year that ended on March 31 the Proposed final dividend of 124 per cent merely maintains the year's total at 22+ per cent. But after examining the latest set of results I have come firmly to the conclusion they are satisfactory.
Pre-tax profit is up to £358,648 from £345,911 the previous year, a smallish increase, but much in line with what the directors anticipated. And it must be remembered that investment allowances are now ex, which to ERF means a drop of more than 4 per cent in earnings.
The fact that the growth rate has tended to slow down would seem to be accounted for by reduced trading by some overseas sections. But there is reason to regard the current yield of 4+ per cent on these shares as acceptable, taking account of the outlook for this well-managed group.
In February this year there were solid indications that the pre tax profit of United Transport Co. would achieve a useful increase compared with the previous year. This turns out to be £4,032,369 against £3,284,542. At the end of the first nine months of the period, profits (pre-tax) were running at about 12 per cent higher than during the same period the year before, but this group really went to town during the final three months; profits soared by as much as 50 per cent compared with the same quarter previously. With earnings of around 45 per cent there is ample cover for the latest 20 per cent dividend (the previous year the dividend was 15 per cent and there was a capital distribution of 5 per cent).
Apart from sound management this group has spent heavily on fleet replacement in recent times, This is clearly showing through. In addition, the group is doing well overseas. Because there is no reason to doubt that this expansive theme will be maintained during the current year the jump of more than 3s. in the price of these shares—to 20s. 74d.—following the latest announcement seems to me to be fully justified. The yield is slightly under 5 per cent, but this shows the market's confidence of growth ahead.