Engineering group Unidare has warned that second-half profits will fall well short of last year's levels and current expectations.

The group issued its latest profit warning after announcing an 18 per cent drop in first-half pre-tax profits to €3.86 million (£3.04 million).

Unidare told shareholders at its annual meeting in March that conditions were tough but it said a further deterioration in the engineering and oil-related sectors had added to the difficulties already being experienced by Unidare's welding products customers in Britain and abroad.

However, Mr Paul Duggan, chief executive, said Unidare had at last found the acquisition it had been searching for and the deal should prove significantly earnings enhancing.

It has agreed to buy Oklahoma Rig & Supply Co., a US wholesaler serving the industrial and oil field supplies distribution channels, for $35 million (€53.1 million).

A further $25 million may become payable depending on the performance of the business in the four years after the sale.

Oklahoma, which is being purchased from the family that owns and runs it, fitted well with Nasco, Unidare's existing business in the US, Mr Duggan said.

Geographically and in terms of customers they complement one another, providing cross-selling opportunities and potential cost savings as well.

Oklahoma reported an operating profit of $6.2 million on sales of $88 million in the year ended September 30th, 1998.

"We think this is a very good transaction and very fairly priced. We are very excited about it," Mr Duggan said.

But Unidare's existing businesses had a tough first half, with sales and operating profits in its distribution division below last year's levels and the company's forecasts.

Turnover in the division fell by 7 per cent to €59.3 million, while operating profits were down by 37 per cent to €2.1 million as Nasco in the US and Oerlikon in Britain both suffered from lower sales.

In the manufacturing division, sales were down by 1.7 per cent at €15 million but the company managed to post a 9 per cent increase in operating profits to €2.0 million.

Overall sales were down by 17 per cent at €74.3 million but pre-tax profits were boosted by an exceptional profit of €0.45 million arising from the sale of the site formerly occupied by E&E Kaye Limited.

Earnings per share at 14.9 cents were down 9 per cent on the first half of last year but the company announced an increased interim dividend of 6.35 cents (5p) per share. The company's share price was down 10 cents yesterday to €2.50.

Meanwhile, Bank of Ireland Asset Management has increased its stake in the company to 9 per cent.