Bottom Line: Heroic effort at Victaulic

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PIPE maker Victaulic was a stock market favourite when most other capital goods businesses were quite the opposite. Its share price peaked at 405p mid- way through 1992 just as the rest of the market hit bottom.

It was popular because it supplied plastic pipe to the capital investment programme then supposedly being implemented by British Gas.

Three years ago one-third of Victaulic's sales were to the UK gas industry. But then British Gas, embroiled in rows with its regulator Ofgas, ratcheted back its capital spending plans.

Now just 17 per cent of turnover is generated from gas pipes as investment subsequently slowed to a crawl.

To its credit, Victaulic realised early that it had a problem. It has been working hard to diversify into wider industrial markets and in the first half 28 per cent of sales were to industrial customers compared with 16 per cent in 1991.

That refocusing helped the company to report its first increase in profits since 1991. First-half pre-tax profits rose to pounds 6.2m from pounds 5.8m. Earnings edged ahead to 3p from 2.7p and the dividend was raised by 4 per cent to 2.6p from 2.5p.

Victaulic's shares, after a 3p slip to 274p yesterday, are on a below-average forward multiple of 14. But despite Victaulic's heroic efforts, shareholders cannot really hope for much more.