Henlys criticises jump in earnings at Cowie

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The Independent Online
A STRONG performance leasing cars has led to a 56 per cent jump in pre-tax profits at T Cowie, the North-east-based motor company.

Taxable profits for the six months to 30 June were pounds 12.1m, up from pounds 7.75m, but were criticised by Henlys, which is defending a hostile bid from Cowie.

Robert Wood, chief executive of Henlys, said the leap in profits owed much to a 'windfall' benefit from interest rates. Cowie's interest payments dropped from pounds 20.1m to pounds 19.3m in the half-year, but Mr Wood said that the greater benefit to Cowie was from interest received rather than paid.

Mr Wood said Cowie was still earning interest from lease deals written when rates were at 15 per cent. He said current agreements were negotiated with interest rates at current levels, and that Cowie's income would be knocked when old deals were replaced or renegotiated.

Cowie's debt gearing is high, but was reduced to 321 per cent, from 386 per cent in December 1991. Without the finance division, gearing is 30 per cent.

Gordon Hodgson, Cowie's chief executive, admitted that the group had done well from the fall in interest rates. However, he said the acquisition in November of Royscot Drive, the contract hire business of Royal Bank of Scotland, was more important.

Cowie's leasing division contributed pounds 8.2m to profits, compared to pounds 5m last time. Royscot added 9,000 cars to Cowie's fleet, which now totals 61,000 cars.

One of the most attractive parts of Henlys for Cowie is its chain of motor dealers. Because of the growth of the leasing division, Cowie is thought to need more outlets to sell used cars, formerly of the hire fleet.

Cowie's motor division improved profits to pounds 3.5m from pounds 3.2m. Profits from Cowie's third division, running Grey Green buses, also rose.

Sir Tom Cowie, the chairman, said that the Inland Revenue's proposals to increase tax on top- of-the-range cars by up to 40 per cent would not damage Cowie's operations.

He said: 'The majority of our fleet is not the top executive style of vehicle. The vast number are Sierras, Cavaliers and Escorts.'

The company is lifting its dividend 33 per cent to 2p. Earnings per share for the interim period were 6.7p compared to 4.6p.

Investment analysts at the stockbroker Albert E Sharp forecast that Cowie would make pre- tax profits of pounds 25m for the full year to this December, and pounds 28m next year.

Cowie shares rose 4p yesterday to 132p, and are trading at a prospective multiple to earnings per share of 9.6 times.