Camas builds on price rises and strong US market; The Investment Column
That was just as well, because the figures themselves for the year to December made pretty dismal reading. Pre-tax profits of pounds 22.8m were down on last year's pounds 24.1m after turnover stagnated at pounds 407.7m. Earnings per share slipped in line to 5.11p (5.47p) and the barely covered dividend was pegged at 3.75p for the third year in a row since Camas was floated off from its former parent, English China Clays.
The real achievement during the year was to increase selling prices in all areas of its UK aggregates arm, despite falls of 10 per cent in volumes. There is little prospect of the road-building programme picking up any time soon, but improvements in the housing market and in commercial building should ensure price rises of up to about 8 per cent continue to stick.
In the US, the Denver market remains impressively strong, particularly in housing, and ready-mixed and aggregates had another good year. Volumes and prices both improved while costs were squeezed, leading to a 20 per cent increase in profits on turnover 16 per cent higher. The US market has been growing well for some time now but there is every sign that the good news will continue into 1997.
On the basis of forecast profits this year of pounds 27m and pounds 32m next time, the sharestrade on a prospective price/ earnings ratio of 14, falling to 11.3. Annualised that equates to a forward rating of 11.5 times, compared with 11.9 for rival Bardon, which arguably has a worse balance sheet and weaker cash flow.
Camas has an underlying asset value of 115p, which underpins the share price, as does a yield of almost 6 per cent. On top of those ratios, the shares are likely to benefit from a continuing consolidation in the industry, which last year saw an unseemly scramble for control of relative minnow Ennemix and is plainly not big enough to support the current number of participants.
A merger with Bardon remains an outside possibility and if it looked more likely might well attract a pre-emptive bid from one of the larger players such as Tarmac, RMC or Redland to prevent the creation of a stronger rival. On that basis the shares are good value.
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