Debt burden forces break-up of engineer FKI

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The Independent Online

FKI, the engineering group, plans to break itself up, with the likely sale of its business that supplies conveyer belts and the unit that provides hardware accessories for windows and doors.

The company said that it did not have the resources to continue to grow all four of its divisions, and the diverse business mix meant its share price did not reflect the true value of the group. Paul Heiden, chief executive, said the company's debt pile, of £345m, was too high for the level of investment required.

"We are between a rock and a hard place," Mr Heiden said. "We're not restricted today. We are more concerned about the medium term."

Announcing a group-wide strategic review, Mr Heiden said that FKI's heavy engineering businesses, which also contain the group's major pension liabilities, were more likely to be retained. These businesses are Lifting Products, which makes steel wires, and Energy Technology, which manufactures electrical generators, and had combined sales of £668m last financial year.

The divisions on the block, Logistex, which supplies conveyor belts and had sales of £304m last year, and Hardware, which had sales of £202m and provides door handles and window locks, focused in the US. They mostly do not make the products themselves. The two units had combined sales of just over £600m last year, but analysts estimated that Logistex might fetch £200m, while Hardware could attract £165m. Analysts pointed out that given the difficult current conditions in the US housing market, it was not a good time to sell the Hardware business.

Mr Heiden said that there were also some other options that would be explored instead of sales, such as financing some divisions separately or forming joint ventures.

"We're ruling nothing in and nothing out. We're just looking to see if a different owner could get more out of our businesses," he said.

FKI also announced interim results, which saw underlying pre-tax profits slip to £34.0m, from £36.1m. Sales increased by nearly 6 per cent to £634.5m. The order intake was 18 per cent better.

Chris Dyett, an analyst at Investec Securities, said: "These were not a good set of numbers. The margins went backwards in three divisions. They were only saved by Lifting Products."

FKI shares closed up 4.5p at 99.75p, valuing the group at £582m.

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