Delta takes pounds 11m for changes

Delta, the electrical equipment, engineering and cable company, yesterday saw its shares fall 26p to 445p, as the group announced that it was taking an pounds 11m exceptional charge to account for a change in strategy in its cabling business.

The charge was disclosed alongside much-as-expected half-year results showing pre-tax profits up to pounds 39.5m from pounds 33.5m last year.

Delta said that it is shifting its business in cables away from small- margin commodity products, towards specialty designs with growth potential, and the charge reflects the need to reduce and reorganise capacity. Dr Robert Easton, chief executive of Delta, said the reinvestment in specialty cables should bring an attractive return from the middle of next year. He added that he was surprised by the market's reaction to the news, since "the figures show a solid advance".

The company's engineering profits showed a substantial advance due to increased volumes in the European businesses, and strong export growth. Profits in circuit protection were impacted by subdued UK demand, a high level of development spending and only modest recovery in the important Middle Eastern markets. Cables continued to suffer from extremely competitive trading conditions - hence the decision to restructure - but industrial services produced an encouraging profits advance.

Earnings per share are forecast by brokers to be around 30p for the year, which puts the shares on a multiple of around 15 times, close to the market average. The interim dividend is lifted from 4.3p to 4.5p.

Analysts who met the company yesterday were concerned by the company's less-than-bullish statements about overall trading conditions, which said that prospects were "difficult to read". Dr Easton described the UK market for the company's products as "not brilliant" but also said that prospects overseas appeared to be fine.

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