View from City Road: Trinity braves the storm

TO float, or not to float must have been an agonising question for Trinity Holdings on Monday night, as it prepared to sell itself to investors with the market in disarray. It would not have been the first to pull a flotation because of market volatility.

The decision by the maker of Dennis dust carts and fire engines to proceed yesterday was brave. Had the market fallen again Barings, its merchant bank, and Albert E Sharp, its broker, could have found it difficult to sell the 25 million shares at 120p each, but in the event they were all placed.

The decision was helped by Trinity's reputation. Following the pounds 27.3m management buyout in 1989 from Hestair, Trinity has tripled profits over the past three years to pounds 3.4m. It forecasts pounds 8.15m pre-tax for the 12 months to next January with the flotation proceeds erasing debts.

Not only has it survived the industry's severe buffeting from overseas companies, like Volvo, but it has taken the fight to foreign shores. Exports account for a third of annualised sales of around pounds 110m. Innovative products, particularly its chassis, which are built 'from the ground up', are even bought by Volvo.

Output has also continued to rise, despite the debilitating effects on the bus, coach and refuse collection vehicle markets of the Government's free-market policies. Deregulation of bus routes and tendering of local authority refuse contracts have squeezed the replacement vehicle market because contractors submitted the lowest bids possible.

Trinity argues that the legislation has been washed out of the system and there is only one way for the vehicle replacement market to go - up. Many dust carts self-destruct in nine years and the average age of Britain's buses is now a daunting 14 years.

The same cannot be said for coaches, however. Even Trinity admits that the recessionary gloom shrouding coaches will prevail for another two or three years. The market for fire engines, while stable for safety reasons, is still, to some extent, at the mercy of cash-strapped local authorities.

Anyone wanting to brave the stock market should phone their broker now. The prospective multiple is a gentle 11.3 times earnings and the yield is an attractive 6 per cent.

(Photograph omitted)