McColl eyes merger as he takes Aim at market valuation

SHARES in engineering firm Clyde Process Solutions rose more than 8 per cent yesterday despite its chairman claiming the market it was listed on was "wrong".

• Jim McColl, founder of Clyde Blowers, said Clyde Process Solutions was worth twice its market capitalisation on Aim. Picture: Robert Perry

Entrepreneur Jim McColl, the founder of Clyde Blowers, hit out at the Alternative Investment Market (Aim), claiming the Doncaster-based firm was worth twice its 17 million market capitalisation. He confirmed that he was considering merging the company with another and taking it onto the main London market.

CPS's latest financial statement values the firm's net assets at 37m.

The group, which specialises in industrial pneumatic conveyancing systems and air filters, posted a rise in full-year operating profits despite the "challenging" economic environment. It also reinstated its dividend after a year's hiatus.

McColl said: "Unfortunately Aim in the past year is not properly valuing small companies. We are not alone in that respect; there are others there."

McColl said he would look at merging with a company that was valued on the same basis as CPS. He said he was also looking at acquisition opportunities, but stressed he was wary of diluting existing holdings.

McColl owns a 16 per cent share of the firm and is its largest non-institutional shareholder.

The chairman described opportunities for organic growth for the firm as "significant", but said the short-term expectations of investors prevented the firm from investing in its growth.

In the year ended 28 February, group revenue fell by 9.5m to 72.5m.

Pre-tax profit slid from 5.5m to 4.6m although the firm claimed "record" operating profit of 6.7m.

A final dividend of 0.8p per share is also proposed.

The company's forward order book at the end of April was 21.8m and CPS plans to broaden its market penetration into areas such as sugar and petrochemicals.

Alex Stewart, chief executive of CPS, which joined Aim in 2006, said the business was in "advanced negotiations" with a company in Delhi to form a joint venture project in India.

McColl said: "The resumption of the dividend reflects the board's confidence in its future and the continuing growth in profits and cash flow despite unsettled market conditions."

In the food sector, the group's clients include Kraft, General Mills, Procter & Gamble and Nestl. In chemicals and metals clients include Dow Chemical, Lafarge, Arcelor Mittal and Anglo American.