Growth to slow at Eurotherm

The Investment Column
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Since Claes Hultman joined as chief executive of Eurotherm five years ago, the electrical components group has gone from strength to strength. Pre-tax profits have grown at least 25 per cent a year since his appointment. The shares have risen more than fivefold.

Yesterday's results continued the trend, although there was a warning that the market would be wrong to expect such spectacular growth every year. This was the first time in years that Eurotherm had not sailed through its profit forecasts.

Pre-tax profits grew by a thumping 30 per cent to pounds 34m in the year to October, although this was slightly below some expectations. Sales were up 16 per cent at pounds 195m.

The growth has been achieved by the disposal of peripheral business to concentrate on the manufacture of industrial process equipment such as temperature controllers.

Mr Hultman has been rationalising manufacturing processes and has invested pounds 10m in new machinery during the year. Stocks have fallen 5 per cent and a steady stream of new products has been launched, which should yield more benefits in the current year than the one just finished.

Eurotherm has successfully integrated the American drive manufacturer it acquired this year. With pounds 31m of cash, up from pounds 21m last year, it is planning other bolt-on deals.

Eurotherm has benefited from a buoyant market in the past 18 months. The European economies have been improving while the plastic industries it supplies have also been enjoying rising fortunes. Although the current year has started well, with orders up 18 per cent in the four weeks since the year-end, the company felt it was prudent to dampen down expectations for the current year. Growth will be dependent on trading conditions, the company said, so don't expect these kind of results in perpetuity.