US litigation leaves BOC on hold

Mersey Docks is looking shipshape; Only here for the beer at Young's
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The Independent Online

The welders of Madison County have cast a shadow over the gases group BOC. Having been exposed to fumes from rods containing manganese, they successfully argued in their local Illinois court that BOC had rendered them susceptible to Parkinson's disease.

Although BOC is to appeal against this decision, more cases will be mounted soon in West Virginia and Ohio. In all, 9,700 welders across several states want to light an oxyacetylene torch under BOC.

Tony Isaac, the chief executive, has bought a fair amount of liability insurance for such cases. The trouble is, you never know with American juries.

For good measure, former workers in litigation-prone Illinois await judgment next Friday on a £69m challenge over the way their pension payments are calculated while, in a separate issue, BOC has lost a case in Texas brought against the Fluorogas subsidiary.

The company's shares fell 32p to 820p yesterday and it was not just the expensive and time-consuming litigation that unnerved investors. Underlying operating profits fell 6 per cent in the three months to September, the fourth quarter of BOC's financial year. That meant underlying profits for the full 12 months were only 1 per cent ahead. BOC Edwards, which supplies the semiconductor industry and has suffered in the hi-tech slump, is proving disappointingly slow to turn round. Business picked up quarter on quarter but was still below last year's level.

Pre-tax profits rose 18 per cent to £395.1m for the year but last time's figures were depressed by one-off costs.

Despite its travails, BOC is a solid set of businesses with potential to benefit from global economic recovery. The improving order intake in September and October, reflecting, in particular, new work for Edwards, will boost profits in the new financial year.

Shareholders who have already suffered yesterday's fall might as well hold on. New investors should wait for the shares to settle before buying for the long term.

Mersey Docks is looking shipshape

Mersey Docks & Harbour's stock exchange announcement yesterday read more like an estate agent brochure than a financial statement. Plans have been submitted to Liverpool City Council, it said, for 162 luxury apartments at the company's prestigious Princes Dock waterfront site. Designed by Sir Terence Conran, the 20- and 10-storey blocks will have panoramic views across the Mersey.

They sound lovely, but far be it from the Investment Column to advise on property purchases. Mersey Docks shares, though, we do feel confident recommending. The plans submitted yesterday reveal that the density of housing on the site is higher than previously expected, which enhances the value to be gained and suggests the second, even bigger development may also outstrip hopes.

Meanwhile, the company is developing its Central Docks site and already has a nice income stream from office space it owns around its ports.

The ports business is looking up, having been affected by the slowdown in global trade. The container terminal in Liverpool recently moved to a five-day week because of increased volumes, and new container services are expected to start up at the docks next year. The renewed economic optimism should also help business at Mersey's own road haulage and shipping ventures.

With plenty of cash to spend on buy-backs and dividends, Mersey shares (which we recommended at 559p last year) are still a buy at 645p.

Only here for the beer at Young's

Young & Co are anything but. The Wandsworth-based brewery claims to be Britain's oldest, a fact that has not helped the sense of vitality among its ageing powers that be.

For years, the family-controlled company, chaired by 82-year-old John Young, has adopted selective deafness in the face of attempts to force change upon the company. This has left Guinness Peat, shareholder activist and second biggest investor after the Young family, drowning its sorrows at AGM after AGM as its calls to simplify the brewer's two-tier share structure go unheard.

Times are changing... a bit. A decision to buy back shares was followed by the appointment of a new chief executive and retail director. Increasing shareholder value and improving the unimpressive returns on capital are the order of the day for the first time.

More money is being spent on sprucing up the 200-strong pub estate, advertising Young's Bitter, adding more hotel bedrooms, improving pub food and training Young's staff. The result was a 7 per cent increase in interim profits, though this also reflected the hot summer.

Before Stephen Goodyear, the chief executive, started talking about the need for more pace and energy, the only people within Young's displaying any urgency were its pub landlords at chucking out time. However, until the family shows signs of relaxing control, the shares, up 5p to 905p, will trade at a massive discount to net asset value. Buy the beer, not the stock.