Howden bounces back with 18m pounds

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The Independent Online
HOWDEN GROUP, the Scottish engineering company, bounced back with pre-tax profits of pounds 18.1m for the year to 30 April, after making profits of only pounds 3 million in the previous year.

The 1991 result was affected by a write-off of more than pounds 10m as a result of a dispute over the supply of plant to the Great Belt tunnel project in Denmark.

The company is still in dispute with MT Group, the consortium building the tunnel, and has provided pounds 1.1m for the costs of further litigation.

The chairman, John Jackson, said that, although it was regrettable that the Great Belt dispute had not been settled and MT Group had now decided to escalate matters by threatening to call two bank guarantees, Howden's board remained confident of its case.

Tim Leahy, an analyst at BZW Securities, said the dispute was unlikely to be resolved until the middle of next year, but that the City was not unduly concerned that there might be further damage to Howden. 'The management has been very straight in detailing what has been happening,' he said.

'The company has performed very well in the last year, and cash generation is good. The order book is also strong at pounds 340m compared to last year's sales of pounds 290m,' he said.

Operating profit increased by pounds 1.3m to pounds 24.3m, 8.3 per cent of turnover. Interest payments halved following a pounds 30.4m rights issue last August and the generation of pounds 8.4m cash from operations. Gearing now stands at 26 per cent.

Mr Jackson said Howden's strength in overseas markets had shielded it from the worst of the recession. He forecast further progress this year.

The group made acquisitions in Germany, the Netherlands and Hong Kong. It sees Eastern Europe and the Pacific Basin as its major potential growth areas in the medium to long term.

The final dividend is 1.3p, giving a total of 2p against 1.59p last time.

The Great Belt dispute involves an order from MT Group for tunnelling machines. They were delivered late, and MT is pursuing claims in the Danish and Scottish courts for damages. Howden maintains the machines were late because of design changes demanded during their manufacture.