FKI set to go on buying spree

The Investment Column

Sentiment towards FKI, the engineering to window furniture group, has been affected by its failure to make good the promise of further acquisitions that accompanied last June's pounds 137m rights issue. But all that is about to change. The pounds 39.2m purchase earlier this month of Wright Products, a US maker of door hardware, could mark the start of a spending spree likely eventually to top pounds 300m.

Jeff Whalley, chairman, revealed yesterday that due diligence is about to start on a second US buy worth around $100m (pounds 65m) and the accountants will be going in on another in the next week or so. FKI is also down to the final shortlist of three in the auction for a big European buy. Success in all three would use the group's entire pounds 300m-odd spending facilities, which included net cash of pounds 53.4m in March, but add turnover of around pounds 400m or close to 50 per cent of the current total.

What Mr Whalley and his team could do with those deals is demonstrated by yesterday's results. Stripping out the pounds 12.2m loss on engineering disposals last time, profits rose a third to pounds 90.1m in the 12 months to March. The figures got a boost from Amdura, the US lifting tackle group acquired last year, which chipped in pounds 13.2m in its first 11 months, but saw margins quadruple to 10 per cent in that period, even after pounds 1.5m of redundancy costs.

Apart from Amdura, the two stars were the engineering and automotive divisions. Now stripped back to a number of niche transformer and switchgear operations, profits almost doubled to pounds 15.7m and the order book is up a fifth.

Meanwhile, the world-leading automotive cables division shrugged aside a $2m hit as a result of the General Motors strike to record profits a third higher at pounds 11.7m. Hardware is seeing signs of a pick-up in housing starts in North America and will this year be without pounds 2.5m of restructuring costs in Germany.

On NatWest's upgraded profits forecast of pounds 108.5m this year, the shares, up 18p at 179p, stand on a forward price-earnings ratio of 14. With organic growth, recovery and acquisition prospects in view, the shares are still good value.

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