FKI warns on costs after small profits rise

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The Independent Online

FKI, THE engineering conglomerate and maker of airport baggage conveyor belts to window and door fittings, disappointed the City with its interim results yesterday.

FKI, THE engineering conglomerate and maker of airport baggage conveyor belts to window and door fittings, disappointed the City with its interim results yesterday.

The shares dropped 5 per cent to 125.5p yesterday after the group managed only a very small rise in underlying pre-tax profits of £1.1m to £33.1m for the six months to 30 September.

Paul Heiden, the chief executive, urged City analysts to tone down their forecasts for the second half of the group's year to take account of the weak dollar and recent disposals. The engineer generates 60 per cent of its revenues from across the Atlantic.

Mr Heiden said that the company was likely to face higher raw materials and energy costs during the second half of its year. "Pressure continues to build on input prices, especially raw materials and energy costs, which are likely to have a greater impact in the second half," he said.

However, there were positive comments from FKI about its second half. The group expects improved order intake levels to continue to benefit its energy technology division, while trading at its hardware business is tipped to remain robust.

Michael Blogg, an analyst at Arbuthnot Securities, said that although FKI's interim results were slightly weaker than hoped for, the group was enjoying 5 per cent underlying sales growth in its operations. He urged investors to buy into the shares, viewing their current rating as undemanding.

Analysts at Merrill Lynch were less impressed, reiterating a "neutral" recommendation for FKI stock and describing its figures as "lacklustre".

In January, the engineer launched an overhaul of its operations. The management earmarked eight loss-making businesses for closure and cut 700 jobs in a bid to reverse the company's fortunes after three years of falling profits. Last month the group withdrew from its loss-making turbine business at an exit cost of £20m. FKI said that further business disposals were under way and that it hoped to complete several by the end of the year.

FKI shareholders can look forward to an interim dividend of 1.5p, unchanged on the amount that was paid for the same period last year.

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