German recession knocks Hopkinsons

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The Independent Online
THE RECESSION in Germany and cuts in capital spending by British Gas helped to savage profits at Hopkinsons, the abrasives and engineering group.

The company has cut the dividend to 1.3p from 3.7p, after making just pounds 2.1m before tax in the year to 31 January against pounds 5.2m the previous year.

The fall came despite a near doubling of turnover to pounds 102.5m, reflecting the first full-year contribution from Carbo, the abrasives company bought by Hopkinsons in 1991.

Carbo accounted for slightly more than half group sales, and its heavy presence in Germany left it exposed to the downturn there.

Forty per cent of group turnover is in Germany, and the abrasives division's operating profits plunged from pounds 876,000 to pounds 374,000.

In the UK, the engineering subsidiary, Bryan Donkin, was hit by falling demand from British Gas, its principal customer, which has cut back on its capital investment programme pending the outcome of a Monopolies and Mergers Commission inquiry into the gas industry.

Interest charges of pounds 1.1m against income of pounds 1.5m the previous year also damaged Hopkinsons' pre-tax figures. The Carbo merger triggered the turnaround from the cash-positive position in 1991-92.

That acquisition now looks more like a reverse takeover, as Ken Jackson, who ran Carbo, was appointed group chief executive of Hopkinsons in February.

He said management had taken decisive steps to cut costs and tailor production to demand, particularly at Donkin, which has been seeking new customers to make up the shortfall in demand from British Gas.

Current trading was similar to the second half last year, although there were some signs of recovery in the UK.

Hopkinsons' share price fell 4p to 40p.