Investment Column: Triplex bubbly in flat Midlands

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The Independent Online
If a Government-backed report published yesterday is to be believed the West Midlands is failing the UK when it comes to manufacturing productivity, investment and competitiveness.

Colin Cooke, non-executive director of Triplex Lloyd, one of the region's best-known metal bashers, disagrees. "Mr Heseltine would be proud of us," he claimed yesterday. His boast is not an idle one. In the year to March 1996 profits on continuing operations rose to pounds 15.4m from pounds 10.7m, helped by a pounds 1.7m property gain, on sales 8 per cent higher at pounds 190m.

Stripping out a pounds 3.9m one-off loss related to the disposal of the remaining building products division, the pre-tax figure was 14 per cent up at pounds 9.5m. The dividend was held at 7p, covered by earnings per share of 10.4p.

With a core competence in castings, Triplex is benefiting from exposure to late cycle sectors, especially in power engineering, which supplies the likes of ABB, Siemens and Westinghouse. Its return on sales jumped from 6.3 per cent to 8.5 per cent and at one power company, Paralloy, sales rose by more than 50 per cent. Small wonder Mr Cooke is confident that double-digit margins will be achieved in this division later this year.

The picture is more mixed on the automotive side. An increased pension charge and maintenance problems at the Precision Components subsidiary restricted the improvement in margins to 5.8 per cent from 5.6 per cent. However, demand for diesel engine components is strengthening and Triplex seems set fair to meet brokers' forecasts of pounds 14m-pounds 15m pre-tax for the full year.

At the higher end of expectations the shares, up 12p to 173p, stand on a prospective p/e of 10. The quality of earnings is unlikely to be enhanced if more property profits are booked, but the rating still looks a little mean.