Fresh horizons for steelmaker

The new year – and a new chairman – heralds fresh opportunities for Ian Williamson, chief executive of Carclo Engineering. The firm’s profit warning last month dismayed the City, leading to a fall in share price and a sheaf of profit downgrades. Brokers believe that Williamson was inhibited under former chairman John Ewart from introducing […]

The new year – and a new chairman – heralds fresh opportunities for Ian Williamson, chief executive of Carclo Engineering.

The firm’s profit warning last month dismayed the City, leading to a fall in share price and a sheaf of profit downgrades.

Brokers believe that Williamson was inhibited under former chairman John Ewart from introducing more profitable interests to the specialist steel and wire maker.

Under Ewart’s successor, George Kennedy, they think he will have a freer hand to restructure the company, with a strong accent on growth businesses.

`Carclo has a strong balance sheet with plenty of cash in it, so there is ample scope to add new profitable interests. Its present businesses are pretty mature,’ said Paul Spencer of stockbroker Granville Davies.

The company’s profit warning came with interims revealing the poor performance of the Lee steel division with profits down 68% at £900,000.

Spencer reckons Lee will contribute only £1.5million for the whole year (against his previous expectation of £6million). For the whole group, Spencer has slashed his earlier estimate by £4.25million to £13.25million. Carclo made £18.2million last year.

A dividend increase is unlikely, with brokers expecting last year’s total 10.25p to be held this year and next.

Carclo’s shares fell 20% to just over £2 on the profit warning, and Spencer sees `no incentive’ to buy.

Mitchell Teager, at broker Albert E Sharp, has trimmed pre-tax profits for the year to around £14.5million, which does not include expected re-construction costs.

Lee’s problem is the slump in stainless steel prices, and Teager sees no improvement in prospect there, but he reckons the other divisions, and hopefully new interests, will bridge the gap next year and restore profits to the £18million he had previously forecast for this year.

Williamson joined the group from BBA, and Spencer thinks it likely that he will add to Carclo interests in areas that occupied him in his former company, such as electrical engineering.