Investment: Warning from Bowthorpe

YOU HAVE to feel for Nick Brookes. The chief executive of Bowthorpe gets almost unanimous approval for the changes he has made at the electronics group. He's reorganised the business into five global divisions, cut costs, beefed up spending on capital equipment and research and development, and shared more information with the City.

Until the beginning of June everything was fine. Then investors got the jitters and the shares slipped to almost half their 604p high. They shed another 34p to 323.5p yesterday as analysts downgraded their full-year profit forecasts to pounds 94m.

At first glance, this looks harsh. In the six months to June Bowthorpe managed an 18 per cent jump in operating profits on an 11 per cent increase in sales. Although this included the benefit of some acquisitions the underlying profit growth rate was still a healthy 11 per cent.

The problem was Bowthorpe's warning that its growth rate in the second half would slow. Although the group's Network Systems division, which serves the fast-moving telecom sector, is expanding quickly, other divisions are not so robust. Profits in the Cable Management division were flat.

That said, forecast profit growth of almost 10 per cent is not bad in a sector where many companies - buffeted by the Asian downturn and the strong pound - are struggling to grow at all. Mr Brookes also has the financial firepower to expand in Asia before the export-led recovery he expects in the region gathers pace

There are risks. Exposure to the personal computer cycle could upset short-term earnings, while there is the prospect of further gloom about the automotive and aerospace industries. But on a forward earnings multiple of just 12 it's hard to see the shares falling much further. A firm hold.