Pifco improves by 79% despite decline in sales

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PIFCO, the small appliance manufacturer, announced a 79 per cent jump in pre-tax profits despite flat sales in the six months to 31 October.

Russell Hobbs Tower, the kettle and toaster business, which was losing more than pounds 1m a month when Pifco acquired it in 1991, is now trading profitably.

Pre-tax profits rose from pounds 588,000 to pounds 1.03m on sales 7 per cent lower at pounds 20.4m. Earnings were 71 per cent higher at 11.8p and the interim dividend is maintained at 3.5p.

Michael Webber, chairman, said the figures were 'a satisfactory outcome given the depressed state of the UK economy'.

He warned that margins remained under pressure and said the devaluation of sterling would start to bite next year as forward currency cover unwound. Half of Pifco's lines are imported.

Russell Hobbs lost pounds 31m in the 28 months before Pifco bought it from Polly Peck's administrators for nearly pounds 8m. Mr Webber said a complete change of culture was needed and the process would take another year to complete.

That involved appointing new management, improving the quality of products and retraining staff. Mr Webber admitted that the recession had made the process slower than he hoped.

Pifco is introducing 30 new products, which it says is the best way to protect margins in a recession. People would pay more for new products whereas existing lines ran up against psychological price ceilings, Mr Webber said.

Pifco aims to return to the operating margins of about 10 per cent it achieved before the Russell Hobbs acquisition. Analysts expect Pifco to make pounds 2m this year, putting the more widely traded A shares, unchanged yesterday at 452p, on a small premium to the market.