FKI improves its lie by buying Truth in the US
The purchase of Truth, which has 50 per cent of the North American market for windows, doors and skylights, is the first big move by FKI, previously a byword for acquisitiveness, since Bob Beeston was appointed chief executive in January 1992.
Eric Bowers, finance director, said that Truth, which makes three-quarters of its profits between April and September, would make a positive contribution to FKI's earnings in the financial year beginning in March 1994. A historic full taxed multiple of 15 looked high but money costs less than 4 per cent to borrow in the US at the moment.
The dollars 102.5m purchase price, financed by borrowings, compares with warranted net assets at Truth of dollars 35.4m and will require a goodwill write-off by FKI of about pounds 45m. Mr Bowers said net debt would more than double to 55 per cent of shareholders' funds as a result, but FKI was comfortable with this level of gearing, which it expected to fall.
In 1992 Truth made profits of dollars 10.2m on sales of dollars 83.8m or an operating margin of 12 per cent. Current trading is well ahead of this. At their pre-recession peak, margins were 16 per cent.
Truth sells its catches, locks and hinges direct to 1,400 manufacturers of windows, patio doors and terrace doors under the 'Truth' brand name.
FKI's own US hardware division, which made profits of pounds 16.1m on sales of pounds 132.6m in the year to March, is also a supplier to manufacturers but 20 per cent of its sales are in the do-it-yourself retail market, supplying castors and floor care products to multiple chains.
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