Cost-cutting produces results at Eurotherm

EUROTHERM, the electronic control manufacturer, more than doubled pre-tax profits from pounds 7.1m to pounds 14.6m in the year to last October, benefiting from stringent cost-cutting measures imposed by its new chief executive, Claes Hultman.

Jack Leonard, chairman, said the company had been trimmed back to suit 'the worst trading environment I have ever experienced', and added: 'There is cause for optimism.'

Orders - 75 per cent of which come from abroad - were slightly ahead of last year and Mr Leonard expected the devaluation of sterling to boost profits this year.

Mr Hultman said that when he was appointed in September 1991 Eurotherm was a 'loose federation of companies which had stagnated after 20 years of good growth'. Internal budgets then were forecasting 20 per cent sales growth despite little evidence from order books.

Mr Hultman sent the budgets back, arranged the businesses into five divisions and reduced overheads of pounds 60m by about pounds 5m a year. Staff numbers were reduced by a third.

Gearing was reduced to 13 per cent from 30 per cent a year ago which, combined with lower interest rates, halved the interest charge to pounds 1m.

Lower staff numbers ensured that operating margins almost doubled to 10 per cent.

Mr Hultman said that margins of 15 per cent were a reasonable expectation for a company like Eurotherm, although he thought 12 per cent would represent a good achievement this year.

Earnings per share rose 110 per cent to 22.3p (10.6p). The final dividend of 5p made a total of 7.2p, 11 per cent up on last year.