Smaller Companies: Camp site operator Baldwin may be heading out of the doldrums

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The performance of Baldwin shares over the past four years looks more like a cardiogram than a classic recovery curve, as the graph illustrates.

Yet evidence provided in the presentation of the company's annual results last Friday suggests that the camp site operator and restaurateur may be coming out of the doldrums.

Baldwin's reputation has been tarnished in recent years by its involvement with London Clubs International, the string of casinos that spectacularly pulled its flotation after problems with a Gaming Board investigation in 1991.

It was obliged to sell its 6 per cent stake in London Clubs to other shareholders for a nominal amount and took a pounds 2m write-off. That cut a hole in results for 1992 but made the figures published last week look sparklingly good.

Profits before tax increased by 111 per cent. However, a better guide to the underlying performance is seen in the more modest 6 per cent rise in operating profit to pounds 2.5m for the year to 31 October.

But even the operating performance hides the true story, because the devaluation of sterling reduced the value of the business Baldwin transacts in France.

Organising camping holidays is not glamorous, but done well it can yield high returns. Baldwin rents pitches from French farmers a summer at a time, unlike some larger rivals that have tied themselves into sometimes costly and inflexible three-year contracts.

The equipment Baldwin needs does not exert undue strain on the balance sheet, and it can beef up revenues substantially by selling holiday insurance and cross-Channel ferry packages.

The pre-tax profit margin in tour operating has increased from 10.8 to 11.3 per cent and Sandy Singh, chief executive, thinks that implementation of cost efficiencies will increase returns even further.

Holidays account for two-thirds of Baldwin's business. The rest is divided between printing - which sits oddly in this mostly leisure company - and restaurants.

It owns 27 Muswells hamburger bars and another five London eateries of which Simpson's chop house in the City is best known.

Baldwin wants to add to its catering operations with the acquisition of pub-type premises but lead sales through food - the main provider of profits growth for numerous brewery companies - rather than drink.

The restaurants do not have the popular attractions of the Cafe Rouge chain controlled by Pelican, the rival at whose stock market reputation Baldwin gapes with envy.

However, while Pelican's shares are trading at an expensive-looking 18 times prospective earnings per share, Baldwin's p/e ratio is hovering around 12.

That is well below the market average and also at a discount to other holiday companies such as Airtours, which owns Eurosites, and Eurocamp, the upmarket camping group.

In addition, a takeover bid - with a predator perhaps using a 10 per cent stake held by London Clubs' former chief David Shamoon as a platform - cannot be ruled out.

On Friday, Baldwin's shares rose 23p to close at 131p - within a whisker of the five-year high and slightly more than double last year's low of 63p.

But, while the long-term prospects for Baldwin look solid, that 20 per cent leap in the shares leaves only limited scope for further immediate progress.