The expected downturn in the aerospace sector hit Doncasters, the diversified engineering group, in the third quarter.
But the company, which took over Midlands-based Triplex Lloyd in 1998, more than compensated for the shortfall in sales with a big rise in demand for its industrial turbine components.
Chairman and chief executive Ian Dillamore said Deritend, the group’s turbines subsidiary in Droitwich, had failed to cope with the upturn in the power market, forcing the group to bring new capacity onstream in North America, Europe and Mexico to meet demand.
The company reported third-quarter earnings of £8.5m, up £700,000 on a year ago. Net sales were down from £68.4m to £67.4m, reflecting falling demand.
Dillamore said demand was not expected to recover in 1999 and so action had been taken to reduce costs, including some job cuts.
But industrial turbine sector sales rose 20.6% to £20.5m, with US demand accelerating quickly.
Dillamore said he anticipated more expansion in the industrial turbines business but said the low share price made further acquisitive expansion more difficult.
He expressed frustration with the performance of the company’s US-listed shares. `They have under-performed even the depressed UK engineering sector,’ he said.
The company’s shares are trading at less than $10 a share, equivalent to a price/earnings ratio of six – compared to at least eight for even its most modestly rated rivals in the UK.
`The market seems to be more interested in chasing unrealistic earnings with larger companies for who growth is not an option. They trade on ridiculous multiples and are not making returns in terms of the cost of borrowing. People are telling me that a market capitalisation of about $21bn is needed even to be considered mid-cap size. I think it’s a load of nonsense.’