Siebe’s forceful chief executive Allen Yurko delivered an upbeat message with the company’s excellent 1996-97 results, stressing that the figures beat brokers’ best expectations.
He also pointed to the splendid margins of the controls systems and temperature and appliances controls divisions (respectively 17% and 16%). Both are strong growth businesses.
But he conceded that industrial equipment had failed to reach target and that the division’s results, hit by flat markets and adverse currency, were `a bit disappointing’.
Group turnover was up 15.6% at £3bn and pre-tax profits 28.1% better at £424m.
For the year, analyst Michael Blogg at broker Charterhouse Tilney forecasts profits of £486m pre-tax and earnings of 62p. For next year he predicted profits of £550m and earnings of 71p. He looks for a 10% dividend lift each time.
The company rejected suggestions that its controls systems business had been shadowed by a downturn in US capital markets, saying the slowdown in the Far East which had affected semi-conductor business last winter is over.
Organic sales accelerated modestly to 9.3% in the second half and would have been up 19.5% but for the impact of the strong pound. The order book was £883m at the start of this year, 23.4% more than previously.
Quizzed about the proposed acquisition of process equipment maker APV, Yurko said Siebe could do as well as it had with its acquisition of the Unitech power controls and semiconductors business. The improvement would `show through in six to nine months’.
But Blogg said APV is a process plant company rather than an automation specialist and does not have the same growth products, nor can it expect to achieve the same margins. He said APV `adds a market dimension’ to Siebe with its exposure to the food and pharmaceutical industries.
Yurko was `not champing at the bit’ for more acquisitions, although he could spend up to £150m on clip-ons. Rotork, the actuators concern, is a likely target say watchers.
Siebe is training 240 staff as blackbelts to work as engineering experts skilled in identifying shopfloor defects and righting them. The company hopes the Six Sigma quality drive will save £50m a year by 2000 and improve margins 1.5%.