Although Siebe Plc faced continuing recession in virtually all of its markets last year, rigorous control of costs and cash flow helped it increase market share and push up profits in all its four core businesses. For the year to April 3, the controls and engineering group saw pre-tax profits rise 9.1% to UKP185.1m, although turnover was flat at UKP1,618.6m. Siebe now generates about half of its revenues in the US. The board is recommending a final dividend of 6.67 pence, an increase of 10.3%, making a total of 10 pence for the year. Shareholders will be offered a scrip alternative. Although the figures were in line with market expectations, the shares jumped 17 pence to 477 pence. Analysts said this was the result of the encouraging statement, the fall in its debt and the fact that it generated lots of cash. Net debt dropped UKP29.4m to UKP489.8m, while gearing fell to 60.4% from 78.8% a year ago as a result of the strong cash generation. And chairman Barrie Stephens denied market rumours that Siebe plans to make a rights issue to reduce its gearing still further. We are not going to issue paper to dress up our balance sheet, he declared. And he reckons the company is on target to meet the promise it made three years ago of cutting gearing to between 50% and 55% by the end of September 1993. Stephens also refuted the possibility that Siebe might undertake a rights issue to finance a major acquisition.
Had to work hard
The last such purchase was process controls specialist, US-based Foxboro Co, in September 1990. While analysts had previously named Lucas Industries and food processing machinery firm, APV Plc, as likely targets, Stephens said We don’t have any huge acquisitions in our sights at the moment. There is nothing in our sights. But things have not been easy for the Windsor, Berkshire-based group over the past year. In the words of Stephens, We have had to work hard for our bread and butter. And despite having increased overall net margins by a full 1% in fiscal 1993, he still sees room for improvement. This, he said, will be achieved by squeezing more out of sales by re-engineering and re-organising production. Siebe’s largest division, controls and industrial automation, which makes electronic and electro-mechanical control products, and includes Foxboro Co, saw operating margins before interest edge up to 16.3% from 16.1% a year ago as the result of careful cost controls. Profits before interest and tax rose to UKP178.9m from UKP175.1m, although sales dropped UKP11m to UKP1,099.1m. But the biggest improvement in margins came from the consumer safety and life support products division. Managing director and chief operating officer Alan Yurko said this business has experienced strong growth in retail sales to US chain stores for personal safety products. Operating margins here rose to 21.8% from 19.2%, on turnover of UKP124.9m. The group’s other divisions, compressed air, mechanical engineering and safety and life support, all reported higher profits due to tight cost controls. While trading in the UK and US was flat in the first half, things improved in the second half. Demand fell in Germany and Japan in the latter part of the year, but Siebe expects Japanese markets to recover in the second half of this year. Stephens said Siebe, Britain’s largest engineering firm in terms of market capitalisation, faces the future with confidence due to a stronger order book and strong balance sheet. Yurko becomes chief executive in January, leaving Stephens as non-executive chairman.
