The Investment Column : Eurocamp lowers its sights

Life as a quoted company has not been a happy experience for Eurocamp, the Continent's leading specialist in holidays under canvas. Floating the company more than five years ago only drew attention to the fat margins available from supplying camping holidays in France to the British middle classes.

Operating returns on sales have fallen almost without interruption from 17.6 per cent in 1991 to last year's 9.5 per cent, after a further 1.5- point fall in the 12 months to October. Rivals like Airtours' Eurosites operation and Rank's Haven caravan business have steadily turned the competitive screw and Eurocamp's shares, down 3p to 231p yesterday, languish at just 6p above the 1991 offer price.

Last year, this competitive background was exacerbated by a 17 per cent slump in bookings across the group, with the UK, which still supplies half the group's business, down by a quarter. Only the first full year's contribution from Superbreak, a short-stay holiday company acquired for an initial pounds 12.7m in 1995, saved yesterday's figures. Profits barely inched ahead to pounds 9.27m while earnings per share slid from 22.4p to 18.3p.

Eurocamp's problems stem from high operational gearing. Traditionally it rents camp sites in France, Italy, Austria and Switzerland before the start of the season and hopes it can fill them by a combination of mail shots and advertising. After a record year in 1995, management failed to anticipate the extent of the downturn last year. In the event, the British were put off by the (then) soaring franc, while the Dutch and Germans took umbrage at French nuclear testing in the Pacific and the possibility that they would be subjected to drug searches at the French border.

Eurocamp scrambled to cut costs and sites, but was still left with unfilled pitches, particularly in June. It reckons it is better prepared this year, having cut the number of sites from 316 to 252 and increased the proportion of capacity that can be dumped at the last minute if demand fails to meet expectations. Currently that is running below last year, although the trend is improving. Williams de Broe expects profits of pounds 11.2m this year, for a forward multiple of 11. Eurocamp's leading market shares could attract a bidder, but investors should not hold their breath. Unattractive.