The Investment Column: Little glamour but good value at Mersey Docks

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The Independent Online
NOBODY COULD ever accuse Mersey Docks chief executive Trevor Furlong of not being consistent.

Every year he says he is on the look-out for UK port acquisitions. He was saying so again yesterday, adding that the country has far too many port operators and that consolidation is the way forward.

Mr Furlong is conscious that the gearing at Mersey, which also owns the Chatham and Sheerness ports in the South-East, is only 35 per cent, leaving plenty of ammunition for a deal. There are 100 or so ports in Britain, mostly run by small companies, with others controlled by local authorities or trusts. So far, though, no one is playing ball.

Not that Mersey needs a deal. Its half-year figures yesterday showed a 7.5 per cent rise in pre-tax profits to pounds 25.6m, despite lower turnover caused by the ending of sludge disposals at sea.

But the group's margins are improving as volumes of less profitable cargo, such as oil and grain, give way to higher margin products such as fruit and cars. The group is looking for a full percentage point margin gain each year as this process continues

Overall, record freight volumes were recorded in containers and in Irish Sea roll-on-roll off cargo, reflecting the booming Irish economy.

Port consultancy is a small but growing part of the business, and Mersey has started work on a grain terminal in Mombasa, Kenya.

This may be an unglamorous sector, but analysts point out that Mersey Docks has improved its earnings per share by an average of 19 per cent a year over the past decade.

On WestLB Panmure's full-year profit forecast of pounds 51m the shares, which closed 34.5p higher at 516p yesterday, are trading on a forward multiple of 12. That rating is a discount to both the sector and the market, which appears to be undeserved. The shares are good value.