Unidare lifts annual profit 19% to £8.2m

Full-year pre-tax profits at Unidare rose by 19 per cent to £8.2 million, but the engineering group has warned that uncertain market conditions will make it hard to improve on the 1998 results.

Unidare said the British market, which accounts for around a third of its business, had experienced a sharp downturn in demand in the last quarter and the company expects tough times in the months ahead.

"In common with many other firms, in the second six months we saw a marked slowdown in the UK," chief executive Mr Paul Duggan said. "Our customer in the UK is the traditional engineering business which has been hit very hard by the strength of sterling and we have seen that clearly in the business."

In particular, welding materials group Oerlikon and Centrajet, which manufactures gas cutting and welding equipment in Britain, face uncertainty in their British and export markets, Unidare said.

Although falling British interest rates and the recent weakening of sterling should begin to help customers, Mr Duggan said he wouldn't expect any improvement until spring.

"We have had some difficult months and we are in for a few difficult months yet."

Although the results were in line with expectations, the poor trading outlook has led analysts to downgrade their 1999 earnings forecasts for the company.

ABN AMRO is now looking for earnings per share of 25p next year compared with a previous forecast of 30p. NCB, which had already shaved its EPS forecast for Unidare from 29p to 28p a few weeks ago, has lowered it further to 26.5p.

Although the outlook for Britain remains uncertain, Mr Duggan noted that the economies of the US and the Netherlands - where the rest of the operations are based - remain reasonably solid.

The company also said that exchange rate movements had a positive impact on the translation of the results into Irish pounds in the year ended September 30th. Had 1997 rates applied in 1998, turnover would have been around £10 million below the £139.2 million recorded while operating profits would have been £0.5 million lower than the actual out-turn of £8.3 million.

Unidare said turnover in its distribution division was up by 11.1 per cent to £101.9 million while operating profits rose by 11.9 per cent. Turnover in the manufacturing division remained at similar levels to last year although operating profits increased by nine per cent.

One of the companies in this division, Southborough International, was sold during the year at a net gain of £0.1 million after goodwill of £1.0 million was written off.

Unidare said that while the sale would improve the quality of earnings, it would be dilutionary in the short-term until the group re-invested the proceeds.

Unidare is on the lookout for a manufacturing business that would complement Daalderop, its Dutch water heater business. On the distribution side, it is looking to acquire a distributor that would fit alongside Nasco, a wholesaler of welding and safety products in the US and Canada, or Eland Electrical, a wholesaler of welding accessories in the UK.

Mr Duggan said the company had net cash of £4.4 million and the capacity to spend between £20 and £25 million on acquisitions.

Earnings per share were up by 18 per cent to 28.6 pence and the company is recommending a final dividend of 13.3 pence per share, an increase of 3.9 per cent.