LTSR-why did it become part of the LMS?

[johnofwessex]

My father worked for The Midland Bank Executor & Trustee Company.  When rail privatisation was announced he had the hump as he had had to spend ages working out the conversion of all these different railway stocks & shares to BTC stock in 1947

[Compound2632]

1 hour ago, The Stationmaster said:

or if it simply ended because theh shareholders had died

 

Surely not. Their shares are part of their estate, passing to their heirs, legatees, and HMRC.

Edited January 27 by Compound2632

[The Stationmaster]

33 minutes ago, Compound2632 said:

 

Surely not. Their shares are part of their estate, passing to their heirs, legatees, and HMRC.

I think that might depend on the type of share. In many cases 'yes' but not always I think we'll find.  Of course with many of these shares where the certificatesy simply chucked away as being consicdered of m no value. (which reminds me I have a form issued by the company asking me to subscribe for shares in the proposed Swindon & Marlborough Railway. I presume that the original recipieny eiter couldn't be bothered, or couldn't afford, to subscribe.

[rodent279]

On 25/01/2024 at 06:46, DenysW said:

There are a couple of those, with some very interesting details and approaches, ending in the conclusion that a 'rational' investor would have stopped holding investments in UK Railways by about 1900. I couldn't follow that, because it wasn't actually supported by data. That doesn't mean it was wrong, of course.

 

I think it simply means that the better UK railway companies (mostly centred in the middle and the north of England) suffered catastrophic declines in their share prices between the peak in 1898 and their minimum in 1922, losing about 70% of their value, and making it essentially impossible for them to raise new capital. As there don't seem to be corresponding  changes-in-profitability issues (other than the long-established gradual squeeze on operating margins) I think this implies that competing investments, especially Government bonds were now paying the same or better than the railways at lower risk.

A slight divergence (but we are so far OT that it doesn't matter really!). The Midland build the S&C in the 1870's, having been told they had to by the Board of Trade (having come to an agreement with the LNW over use of the Ingleton-Tebay line, the MR petioned the BoT to have the powers to build the S&C revoked-at least, that's my understanding).

So the S&C was built, at huge cost, but this does not seem to have affected the MR's financial position.

We all know the GC London extension was money down the drain-was the S&C any more of a moneyspinner for the Midland?

[Compound2632]

25 minutes ago, rodent279 said:

A slight divergence (but we are so far OT that it doesn't matter really!). The Midland build the S&C in the 1870's, having been told they had to by the Board of Trade (having come to an agreement with the LNW over use of the Ingleton-Tebay line, the MR petioned the BoT to have the powers to build the S&C revoked-at least, that's my understanding).

So the S&C was built, at huge cost, but this does not seem to have affected the MR's financial position.

We all know the GC London extension was money down the drain-was the S&C any more of a moneyspinner for the Midland?

 

Not the Board of Trade but Parliament - the power to build the S&C was by Act of Parliament; Parliament declined the abandonment bill after petitioning from those who really stood to gain from the S&C - the G&SWR, NBR, and L&YR.

 

In the sense that Midland dividends declined after the 1870s by no more than those of other companies - and less than some - one has to conclude that the S&C wasn't a bad investment. 

 

@DenysW will be along to confirm the facts, I hope.

[2251]

On 27/01/2024 at 15:30, The Stationmaster said:

I think that might depend on the type of share. In many cases 'yes' but not always I think we'll find.  Of course with many of these shares where the certificatesy simply chucked away as being consicdered of m no value. (which reminds me I have a form issued by the company asking me to subscribe for shares in the proposed Swindon & Marlborough Railway. I presume that the original recipieny eiter couldn't be bothered, or couldn't afford, to subscribe.

 

There are no circumstances whatever in which a shareholding in a company ceases to exist merely because the shareholder dies. 

 

Disposing of the certificate does not mean that the shareholding ceases to exist either -- what really matters is the register maintained by the company in question.

 

[DenysW]

3 hours ago, Compound2632 said:

n the sense that Midland dividends declined after the 1870s by no more than those of other companies - and less than some - one has to conclude that the S&C wasn't a bad investment. 

 

@DenysW will be along to confirm the facts, I hope.

I've been struggling to work out how to define the data that would show whether a big investment was worthwhile. The London/Manchester extensions of the Midland clearly were (Capitalisation increase by 50%, receipts by 100%, profitability maintained, general England/wales receipts increase only about 60%, all numbers wildly rounded). The S&C was too small to tell (the cost is reported as £3-5M, whereas the Midland's capitalisation was £65M in 1879). The Great Northern's Derbyshire Extension was mildly negative, and the Great Central's London Extension would probably have been a success if they hadn't done Part 2, Joint with GWR.

 

The Midland's takeover of the Leeds & Bradford was clearly a fiasco financially (10% interest paid), whereas the Bristol and Gloucester (6% interest paid) was probably just over-optimistic, and the Leicester & Swannington (8% interest paid) was too small to reveal how bad  a deal it was. I'm also convinced that, whatever the Manchester & Leeds Railway's thinking, the immediately-following Lancashire & Yorkshire Railway would have known it couldn't afford the £45k/year for the Leeds & Bradford. It didn't have the turnover, and it now had much higher capitalisation than when it was single. So there was no effective competition to buy the L&B, irrespective of any claims Hudson made.

 

As for dividends it's pretty much in line with @Compound2632's summary. A downward trend overall 1873-1893, the coal strike blip in 1893, then stability or a slight improvement to WW1. It is however, necessary to dig deeper to understand that the Great Central wasn't as bad as this graph implies. Only about 20% of its share capitalisation was Ordinary stock, and it didn't do anywhere near as bad a job of paying dividends on its Preferred stock - mostly at 4%. There were only about 5 years where it failed to pay out on most of the Preferred.

 

 

 

[JimC]

On 26/01/2024 at 21:48, Compound2632 said:

I suppose it was necessary to have at minimum one director from each constituent company.

According to Pole's book the GWR kept its existing 19 directors and added one from each of the constituents. I would say his text implies this was convenient rather than essential though.

[2251]

1 hour ago, DenysW said:

I've been struggling to work out how to define the data that would show whether a big investment was worthwhile. The London/Manchester extensions of the Midland clearly were (Capitalisation increase by 50%, receipts by 100%, profitability maintained, general England/wales receipts increase only about 60%, all numbers wildly rounded). The S&C was too small to tell (the cost is reported as £3-5M, whereas the Midland's capitalisation was £65M in 1879). The Great Northern's Derbyshire Extension was mildly negative, and the Great Central's London Extension would probably have been a success if they hadn't done Part 2, Joint with GWR.

 

The Midland's takeover of the Leeds & Bradford was clearly a fiasco financially (10% interest paid), whereas the Bristol and Gloucester (6% interest paid) was probably just over-optimistic, and the Leicester & Swannington (8% interest paid) was too small to reveal how bad  a deal it was. I'm also convinced that, whatever the Manchester & Leeds Railway's thinking, the immediately-following Lancashire & Yorkshire Railway would have known it couldn't afford the £45k/year for the Leeds & Bradford. It didn't have the turnover, and it now had much higher capitalisation than when it was single. So there was no effective competition to buy the L&B, irrespective of any claims Hudson made.

 

As for dividends it's pretty much in line with @Compound2632's summary. A downward trend overall 1873-1893, the coal strike blip in 1893, then stability or a slight improvement to WW1. It is however, necessary to dig deeper to understand that the Great Central wasn't as bad as this graph implies. Only about 20% of its share capitalisation was Ordinary stock, and it didn't do anywhere near as bad a job of paying dividends on its Preferred stock - mostly at 4%. There were only about 5 years where it failed to pay out on most of the Preferred.

 

 

 

 

This is all very interesting stuff but I assume that the capitalisation figure is based on the par value of the securities and is not a market capitalisation figure.

 

For an investor who has bought on the secondary market, surely the p/e ratio is far more important than the nominal percentage yield calculated by reference to par value? 

[DenysW]

52 minutes ago, 2251 said:

capitalisation figure is based on the par value of the securities and is not a market capitalisation figure.

It's par-value capitalisation, I'm afraid, as declared by the railway companies in their accounts, and used by them to declare dividends as a function of their original £100 shares (or normalised to the same). This is also what the Bradshaw's Shareholder's Guides published pre-WW1 quoted. The Midland share prices (monthly data downloaded from a Yale University digitisation) compared to the sector market average were as below, as are the MSL/GCR Preferred and Deferred prices. All of the shares were very volatile, with +/- 10% in a year very possible even for the quieter ones. I've put Bradshaw's Midland annual max/min numbers as a table after the graphs.  So p/e ratios are even more noisy and problematic to the point where I haven't bothered to calculate them. The MSL/GCR prices show that the market lost faith in the GCR's Preferred shares once it started the London Extension, and never had much faith in it Ordinary/Deferred shares coming back.

 

As a final note, even the LC&D Ordinary shares (which didn't pay a dividend from insolvency in the 1860s to WW1) did not trade at zero value, showing a market that must have over-valued railway stocks - compared to predicted reality - rather than undervalued them.

 

 

 

 

 

 

[2251]

Many thanks for taking the time to pull together and post this -- it really is fascinating (at least to me). 

[DenysW]

2 minutes ago, 2251 said:

Many thanks for taking the time to pull together and post this --

It's just a hobby, combined with (severe) annoyance at the History books that are fascinated with hardware (bridges, locomotives, carriages, stations, etc.), and events (when was Hudson's departure? Did he die?) and ignore questions like "Did it make sense and/or work financially?", "Were they (roughly) honest?", and so on. Also the question "Were the long-term survivors competent, and which was the best?" As such it was pre-collated, and I just had to find the piccies.