UNIDARE, the engineering group, has recorded a slump in pre tax profit from £8.1 million to £4.4 million in the year to September 30th 1996. Shareholders had been alerted, by the company on two separate occasions to expect a sharp fall. The out turn is just a little less severe than what had been anticipated.
The profit decline is attributed to poor results from its engineering supplies distribution business and to a write off of £1.43 million following the sale of its plastics business.
Despite the poor results, an unchanged final dividend of 12.26p has been declared, making the same total of 16.86p. Unidare has not earned sufficient to pay the dividends out of the past year's earnings. It has only been able to make the payment by taking £563,000 out of reserves.
Chief executive Mr Paul Duggan explained that the maintained dividends only failed to be covered because of the exceptional charge and were covered by operating profits. Unidare has net cash of £4.3 million and it "would be very hard to hold on to that money" and cut the dividends. Also the "management is confident about the future".
The two remaining core businesses - engineering supplies and the manufacture of engineering products - were trading better than in the spring. Mr Duggan noted the group now had a "narrower and more focused portfolio of businesses from which we expect to grow".
Despite an uncertain outlook in many of its markets, he added, the group would inject further in vestment into its businesses. This could be around £4 million this year.
And Unidare is continuing to look for acquisitions. This was "part of the growth plan", said Mr Duggan. While nothing was imminent, the group was hopeful that an acquisition would be made soon.
In the meantime, the recent strength of the pound would, "if sustained, adversely impact the translation of the profits generated this year in its US and Dutch operation, although this would be partially offset if sterling's relative strength continued".
There was an adverse currency translation of between £200,000 and £300,000 in the past year, he said. Sales fell from £151.5 million to £131 million. Earnings (before exceptionals) dropped from 31.27p to 21.20p a share.
A breakdown of operating profits shows a fall, from £5.7 million to £3.7 million, in engineering supplies and a rise from £2.7 million to £3 million in the manufacture of engineering products.
Reviewing the results, Unidare said the discontinued plastics side was sold for around £5.4 million sterling. Its operating profit fell from £750,000 to £650,000.
The past year had been difficult for engineering supplies, Unidare said. The performance in the US and Europe "fell well behind expectations" leading to reduced profit margins. Nasco, in the US, had maintained sales but there was a "significant" erosion of margins.
