The Investment Column: Cammell on acquisition alert

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The Independent Online
CAMMELL LAIRD, the marine services company which takes its name from the Cammell Laird shipyard it acquired in 1993, was floated two years ago at pounds 1. It has since steadily soared up to 855p as the market has got used to the idea that it is not a struggling shipbuilder. The market now recognises that Laird is not just a ship repairer either, but a sophisticated services business. Does this mean that the shares will stall?

Last year the group enjoyed spectacular growth in sales, which more than trebled. That followed the acquisition of facilities in the North-east and a full year's contribution from a shipyard leased from the government of Gibraltar.

The renovation of dry docks in Birkenhead added to the momentum. But Laird is stuck when it comes to delivering organic growth.

The success of the acquisitions indicates Laird's skill in identifying cheap assets to which it can apply its expertise. It does not build ships, but is able to snap up redundant ship yards which provide facilities for repair and refurbishment. Both activities are growing markets, and Laird aims to command competitive advantage in both by offering customers complete solutions. It already has the advantage that, by virtue of its UK location, it has inherited low-cost skilled labour and assets.

In repair, Laird's Gibraltar operations benefit from the deep-water oil exploration taking place off the West coast of Africa. In refurbishment, the group expects to receive further orders following the satisfaction of Airtours with a recent cruise ship re-fit. Meanwhile, as the British population ages, the cruise holiday business is expected to grow.

Marine services are a highly fragmented market, and in each of its markets, from defence to cruise ships, Laird faces competition. But it is unique in the range of markets it is exposed too. That insulates it from downturns in any one. This year's record was achieved against a background of crisis in the oil industry.

Laird is now on the lookout for acquisitions to enable it to meet its customers' needs with greater flexibility.

It aims to be able to either supply, source, design or re-fit ships as required. Given its track record in turning around moribund assets, shareholders can be confident that Laird will not be reckless.

Analysts expect pre-tax profits of pounds 15.3m this year and earnings of 40.7p per share, rising to pounds 18.2m and 47.8p. The shares, which closed up 12.5p at 855p, are near their recent all-time high of 860p. On a forward p/e of 21. That's still a discount to the market and given the transparency of Laird's forthcoming earnings growth, unjustified. Laird will lead consolidation in its industry and the shares are undervalued