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Investment Column: FKI


NOWADAYS MOST of the world's largest companies make their money from intangible assets like patents, brands or websites. , on the other hand, makes engine turbines and window frames. No wonder the engineering group feels obliged to identify a role in the e-commerce chain where it can add value and secure future earnings growth.

plans to use its Crisplant business, a Danish sorting systems company acquired earlier this week, to carve out a niche as an intermediary between Internet vendors and distributors like FedEx. Crisplant already has an DKr260m (pounds 23m) order from a "well-known" US on-line trader. Chief executive Bob Beeston suggests e-commerce could deliver around pounds 20m of revenues initially.

The problem for , as for its engineering peers, is that it is stuck in mature markets which deliver organic growth of around only 3 per cent. Fund managers perceive it as a stock that has come to a halt. Hence its meagre p/e of 8.5.

's hunt for new opportunities is not restricted to e-commerce, however. It aims to leverage its materials handling skills by using the distribution network acquired with Bridon in 1997. The Japanese office equipment market, worth pounds 8bn annually, is another target.

Yesterday's results saw the materials handling and hardware divisions lift sales by pounds 120m, though acquisitions accounted for pounds 100m of this. Operating profits in the engineering division grew by 22 per cent despite falling sales on the back of better business mix.

Despite its efforts to discover new markets, is dogged by negative sentiment. There are some clouds on the horizon too - the UK-based engineering division is vulnerable to sterling strength and the group has warned that rising US interest rates could hit its US window business. Analysts expect pre-tax profits of pounds 168m this year and earnings of 21p per share. At 184.5p, the shares are unlikely to soar in the near-term.