Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

Investment Column: Standards slip at Siebe

Tuesday 02 June 1998 23:02 BST
Comments

SIEBE is a victim of its own success. It's not often that the announcement of record profits leads to a dramatic fall in the share price. But Siebe is supposed to be a class act with high standards, and those standards have slipped.

The engineering giant's share price fell 126p to 1377p yesterday after pre-tax profits came in at pounds 486m, a rise of 14.7 per cent, but below the pounds 500m some analysts had expected.

The company was hurt by the downturn in the Far East and the strength of the pound and dollar. But the City was also worried by a slowdown in organic growth during the second half of the year.

Moreover, analysts were shaken by the high cost of restructuring and the fact that Siebe says pounds 100m more must be spent on heavy cuts over the next two years, when it plans to cut 4,000 jobs world-wide.

This is the downside of Siebe's recent flurry of acquisitions. In the past year, it has spent pounds 1.3bn on deals that include APV, the industrial processing group, and Eurotherm, the controls maker. Bedding down those buys will cost money.

Chief executive Allen Yurko believes the pound and dollar will remain strong for some time. To counter this and other problems - like a squeeze on prices as a result of deflation - some manufacturing will be shifted to lower-cost areas.

Six months ago Mr Yurko was bullish about the Far East but he admitted yesterday he plans to shift away from the region.

Analysts have downgraded their 1998 profit estimates to about pounds 545m. This gives Siebe a forward multiple of 20 times. High enough

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in