FKI to axe 700 jobs and close eight businesses

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The Independent Online

The engineering group FKI announced a sweeping rationalisation programme yesterday which will result in the closure of eight of its businesses with the loss of 700 jobs. A further four businesses employing about 1,000 staff will be sold following a strategic review undertaken by the new chief executive, Paul Heiden.

The total cost of the restructuring will amount to £68m although Mr Heiden said he expected the closures and disposals to generate £110m of cash over a four-year period.

The cutbacks were accompanied by a warning that current trading remained difficult, although Mr Heiden said the pressure on FKI's balance sheet was easing to the point where it should no longer be a concern for investors.

FKI declined to say which businesses would close except for Laurence Scott and Electromotors in Norwich, which employ 250 people.

Of the 700 job losses, just over half will be in the UK with the rest spread across Europe and the US. FKI's current workforce of 14,000 will shrink to about 12,300 once the disposals and closures are complete. The targeted businesses account for about 10 per cent of FKI's £1.4bn turnover and 20 per cent of its invested capital.

Mr Heiden said that in the future FKI would concentrate on eight businesses classed as either "key" or "emerging". The key businesses are Bridon, which makes steel wire rope; Crosby, which makes lifting components; the materials handling business Logistex; Brush Electrical Machines; and Truth and Wright Products, which makes door and window hardware.

The three businesses identified as having good medium term potential are Bristol Babcock, which makes measurement and control equipment, FKI Switchgear and the wind turbine manufacturer DeWind.

Even after the rationalisation, FKI will still remain a diversified group with 19 separate businesses spread across about 40 sites. However, Mr Heiden said there would be more control from the centre and more rigorous risk management.

He added that FKI's overall performance continued to be affected by difficult markets. Trading at Logistex, in particular, was being affected by delayed orders. The weakness of the dollar is also taking its toll and is expected to reduce full-year profits by about £5m. More than half FKI's profits come from the US.

However, the weakness of the American currency has also helped reduce FKI's debts by about £20m. At the half-year stage they stood at £422m.

The businesses being disposed of have turnover of £90m and net assets of £34m but Mr Heiden said he expected the sales to raise more than this. Further proceeds will be generated from property sales which are expected to raise £43m over the next few years, of which £20m has already been realised.

FKI shares fell 3 per cent or 4p at 117.75p.