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Semi-conductors strength boosts Diploma: Profits increase by 53% after electronics recovery triggers surge in demand

CONTINUING strong demand for semi-conductors helped Diploma, the electronics, building products and special steels group, to increase pre-tax profits by 53 per cent in the year to September.

Christopher Thomas, chairman, said recovery in the electronics sector had caused demand to be over-stimulated by fear of product shortages. But he warned that orders in building products continued to be depressed.

Pre-tax profits rose to pounds 20.4m ( pounds 13.3m) on a 12 per cent increase in sales to pounds 158m. Earnings per share were 24.4p (13.2p) and a final dividend of 8.5p (7p) made a full-year total of 12p (9.75p).

Macro Group, the component distributor, increased sales by 35 per cent and profits by 50 per cent after some suppliers closed their order books, causing a 'frantic' response from customers.

Mr Thomas said unprecedented demand had caught out semi-conductor manufacturers, forcing them to extend delivery times. He said the resultant double-ordering by distributors was reminiscent of the surges of activity of the 1970s and early 1980s.

Sales from the electronics division rose by 34 per cent to pounds 104m, with operating profits jumping from pounds 8.4m to pounds 12.9m.

In building products, the easing of the recession was producing 'encouraging signs' but Mr Thomas said these were not yet being translated into orders. This effect was marked in Norwood Partitions and Williamson Cliff, where low-facing brick sales contributed to a further loss.

Mr Thomas said: 'New projects at the drawing board stage are few, and with the time lag before construction often in years rather than months it is going to be a long, hard winter.'

IG Lintels benefited from increased activity in the house market, but competition and pricecutting kept pressure on margins.

Profits from building products emerged at pounds 7m ( pounds 6m) on almost unchanged turnover of pounds 42.8m. Cost-cutting in special steels helped the division to counter the effects of a further reduction in demand from the oil services sector. Profits were pounds 1m ( pounds 700,000) from maintained sales of pounds 11.1m. The shares closed 3p lower at 563p.