By Hugh Sharpe
Andrew Parrish, new chief executive of Senior Engineering aims to drive up profits of the `under-managed, under-invested’ engineered products and services companies in the group.
`Their margins (some under 5%) are unsatisfactory and we aim to get them up.
`These are basically sound businesses and their managements are quite capable of improving their financial performance,’ he said.
To increase profits, the division’s 11 companies must `sell more and spend less’, the aim is to cut costs and improve marketing.
Parrish has moved from the industrial conglomerate Williams `where such margins would not be acceptable,’ he said. He plans to invest £8m in the businesses this year, and will start with a new £2m tube mill at the Oldbury plant.
The investment focus will be on Flexonics, the flexible tubing business, where margins last year were an acceptable 9%. This year, investment will be £18m, making a group total of £26m (£15m last year).
Parrish impressed the City with his presentation of the results, and the shares gained by 10%. `It looks like the new broom will deliver,’ one analyst commented.
Senior recently sold off what Parrish describes as the `millstone’ of its loss-making thermal engineering business at a cost to the company of £29.3m. While operating profits of the continuing businesses were up 21.7% at £35.9m on sales up 18% at £439m, profits pre-tax were £2.7m (£22.1m).
Operating profits at Flexonics increased 41% at £27.4m. Profits from engineered products fell 16% to £8.4m, largely because of `continued pressure on margins’. Of the three businesses in the division, only air products increased its profits contribution.
Broker Panmure Gordon forecasts profits this year of £39.6m pre-tax, with the operating profits from Flexonics of £32.5m and £9.3m from the engineered products and services.