Strong demand in the North American and Far Eastern market have helped engineering group Siebe Plc to a record 28.5% growth in profits at the half year. And chief exective Allen Yurko said he saw no slackening in demand in North America. We think it has another year, 18 months, perhaps longer than that, he said. Non-UK sales represented 92.7% of the Windsor, Berkshire-based process control and engineering group’s turnover and 92.3% of its profits. Singapore, Malaysia and Thailand were particularly buoyant and Japan and Australia were showing signs of recovery, said the company, although continental Europe was still subdued. The home market had strengthened across all segments. Group chairman Barrie Stephens said that Siebe had set itself tough short-term targets but that its results showed these were achievable. Prospects for the group are therefore very encouraging for this financial year, Stephens said. But despite the positive talk, the dividend of 4.03 pence was lower than the 4.2 pence that the market had predicted for the group. Siebe’s core division makes systems to control everything from manufacturing processes at chemical plants to air conditioning and accounts for more than 70% of its turnover. Within that core division, the temperature and appliance control business boosted profits by 8.5% to UKP57.4m and had a 12.2% increase in orders. The other half of the core division, control systems, increased earnings to UKP57.2m from UKP43.2m last time. It too is experiencing a growth in market share, to such an extent that it is expanding its sales offices overseas; in Japan its joint venture is to become a wholly-owned subsidiary and full sales and service operations will be established in Australia, Russia, Belgium, Brazil, Spain and Switzerland. Overall, pre-tax profits rose to UKP119.5m from UKP93m last time. Yurko said that further potential on margins could be gained from several divisions where profit margins were below what Siebe considered an acceptable level of 10%. Yurko said that Siebe could reassure analysts’ nerves over the sustainability of the group’s margins by pointing to its cost reductions and productivity increases as well as new products that offered more features at lower cost.
Acquisitions
Working capital management programmes were credited for the improvement in the group’s cash flow. During the first half the company took a restructuring charge of UKP5m to account for on-going cost reduction and facility rationalisation; this charge was partially off-set by gains on fixed asset sales of UKP2.8m. He said the group’s aim was not to raise its profits margins from 15%, which he called an excellent level. The idea is to tweak those margins up while maintaining growth, Yurko added. Siebe was as acquisitive this half as it was last year. Last week it agreed to buy 75% of Eliwell SpA for UKP9.7m and Appliance Controls Technology Inc for UKP13m (CI No 2,557). Last month it paid $90m to buy Irvine, California-based Triconex Corp, which makes industrial safety and control systems (CI No 2,544). In October it concluded its purchase of a minority interest in German company Eckardt AG at a cost of UKP64.3m (CI No 2,428). Eckardt, one of the company’s purely computer-oriented divisions, and the NAF Group, which was purchased in March, contributed UKP52m worth of sales and UKP2.7m of profit.
