Cammell's conversion

Investment Column

Cammell's conversion

CAMMELL LAIRD was once stricken by the British disease of strikes and trade union militancy but 20 years down the slipway it is becoming a model of efficiency and profitability. Of course, a lot of water has flowed underneath the bridge. Cammell Laird no longer builds vessels but only repairs and converts ships and offshore craft.

Floated last year, the company's stock has soared from 100p to yesterday's close at 490p, down 35p. The increase is partly due to investors realising this is not the old Cammell Laird but also because prospects look increasingly bright.

Yesterday the company, chaired by Juan Kelly, a former boss of Shell Tankers, unveiled a massive increase in pre-tax profits from pounds 2.2m to pounds 4.1m. Turnover was up from pounds 22.6m to pounds 31.7m, and Cammell Laird unveiled a maiden dividend of 4.4p.

The company has made its mark by concentrating on hi-tech work. This is less price-sensitive and protected from competition in areas like Singapore. Although some shipping markets are been hammered by the Far East downturn, owners are facing ever-tougher regulations while conversion work is seen as a cheap alternative to building new ships.

The company is quickly expanding, having trebled the size of the Birkenhead facility and taken over the lease on a Gibraltar dry dock in February. It has also bought one of its contractors in DG Electrical, a specialist in marine electrical and electronic systems, and is fast developing its design capability. It is also eyeing up newly privatised capacity in continental Europe, and may bid for military contracts.

Analysts are predicting Cammell Laird could increase profits to pounds 7m this year, putting the shares on a forward multiple 20. That is high enough for now but watch for more positive developments.

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