Bottom Line: Boost from America

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THE ELECTRICAL engineering group FKI passed a landmark yesterday when it reported that more than half of its profit in the first half of this year came from North America.

Bob Beeston, chief executive, said the group's businesses were seeing a significant recovery in the region. This, and continued cost- cutting, produced the substantial improvement. In the same period last year only 39.5 per cent of profit came from North America.

Meanwhile, Continental Europe remained in recession and there was little improvement in Britain. But, despite recession, Mr Beeston's long-term and aggressive programme of cost-cutting ensured that operating profits rose across all five business divisions.

Pre-tax profit for the six months to 30 September rose by 41.6 per cent to pounds 22.1m, earnings per share by 37.5 per cent and turnover by 18.6 per cent to pounds 394.1m, while the interim dividend is 25 per cent higher at 1.5p net.

Nowhere was the effect of management's actions seen more clearly than the automotive division. Following a big rationalisation programme in North America operating profit soared to pounds 1.71m from pounds 125,000. In addition, a global sourcing programme ensured significant savings in the cost of materials in Europe.

North American operations look like continuing to be the source of a growing proportion of group profit.

The region seems destined for a more pronounced recovery than any other areas of activity, and Truth - the US hardware business acquired earlier this month - should be very good for both pre- tax profit and earnings per share in the next financial year.

Given this, and plenty of scope for further cost-cutting, FKI's profit and earnings per share should continue to increase at an impressive rate. But the shares at 183.5p, up 5.5p yesterday, seem abreast of events.

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