Cookson keeps up pace of recovery with 50% rise

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The Independent Online
TOM STEVENSON

City Editor

The dramatic recovery at the circuit board to ceramics group Cookson continued in 1995 as strong sales growth and margin improvement sent profits and cash flow soaring.

Richard Oster, chief executive, said: "Global expansion, a clear focus on new product development and customer service have enabled the group to grow its major businesses despite the increasingly competitive environment."

Pre-tax profits jumped 50 per cent to pounds 181m (pounds 121m) after a 15 per cent rise in sales to pounds 1.8bn was compounded by a widening in operating margin from 9 per cent to 11.1 per cent. Mr Oster said a 15 per cent return on sales was achievable to put Cookson on a par with diversified rivals such as BTR, TI and Williams.

Last year's improved result means profits have soared from under pounds 20m in 1991, when the return on sales was under 7 per cent.

That rise meant the company was able to pay a final dividend 18 per cent higher at 4.5p to give a full-year payout 14 per cent better at 8p. Cookson's shares, which have tripled in value over the past four years, closed 7p lower at 318p as the market paused for breath after the past year's strong outperformance.

The biggest surprise to analysts was a big swing in Cookson's cash flow, which saw it generate pounds 50m compared with last year's pounds 17m absorption. That put Cookson on track to meet its target of generating pounds 500m over the next four years from debt and internal cash flow for investment in its four main businesses.

Mr Oster said the key to Cookson's success over the past few years was a constant drive to create new products. He estimated that a quarter of the company's profits in five years' time would come from products not yet in existence.

Electronics, which makes circuit boards and is one of Cookson's fastest- growing markets, saw profits rise 52 per cent to pounds 80m as demand from computer, mobile phone and car manufactuers remained high. The company estimates that the electronic content of cars will double over the next 10 years, maintaining the division's momentum.

In ceramics, the refractories business continued to grow faster than the steel industry it mainly serves by taking market share.

The ceramics supplies business, a joint venture with Johnson Matthey, also made good progress in its first year of trading.

Thanks to the group's cash generation and a pounds 193m rights issue a year ago at 175p the balance sheet remained strong, with gearing at the year end down to 6 per cent from 36 per cent 12 months earlier.

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