Portals' pre-tax increase fails to impress market

AN 8 per cent increase in half-time pre-tax profits to pounds 12.6m at Portals Group, the banknote to teabag and environmental protection group, met an unenthusiastic response from the stock market yesterday, which marked its share price 12p lower to 374p.

The increase was coupled with an unchanged interim dividend. Some analysts had been looking for a more substantial profits improvement on the back of a pounds 1m cost-cutting programme and a sharp recovery in Portals' protection and controls division.

Given the company's commitment to 'superior' dividend performance an increased payout had also been expected.

Michael Morley, chief executive, said that the results were a resilient performance in difficult trading circumstances.

But against a strong 1991 and in view of the fact that 60 per cent of business came from overseas any advance on last year's pre-tax total of pounds 27.6m would depend on a pick-up in international activity.

Explaining the board's decision to leave the interim dividend unchanged at 5p, despite a 6 per cent earnings increase and balance sheet gearing of only 5 per cent, Mr Morley recalled that Portals did the same in 1991 but increased its final payment by 10 per cent.

One reason for caution is that a number of central bank customers for banknotes have been delaying the placement of orders.

Operating profits in security and specialist paper making were 3.8 per cent higher at pounds 10m as sales slipped 3 per cent to pounds 46.7m. Order delays and pricing pressures, particularly from state-owned banknote producers, undid much of the cost savings at Portals' Overton Mill, and Bathford Mill also suffered from a less buoyant travellers' cheque market.

Tim Harris of Nomura was not disappointed by the figures and has held his profits forecast at pounds 29m for the year. 'We still think Portals is worth more than a p/e of 12,' he said.