Smaller Companies: Protean pulls off a bargain double

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The Independent Online
GEOFF SPINK, managing director of Protean, appears to have a taste for Christmas shopping. Last week the laboratory equipment supplier announced two important acquisitions almost exactly a year after its last purchase.

They look like bargains that Santa would have been pleased to slip into his sack. Indeed, three months ago this column reported that Mr Spink was in talks to buy at least one for pounds 3m and it could be clinched by Christmas.

But Protean has done better, buying LIP (Equipment & Services) and Techne for a total of pounds 9.6m, to be financed by a pounds 10m placing and open offer at 180p a share.

It is buying the two businesses at below 10 times their underlying profits, which should help boost its earnings next year.

Apart from making good sense financially, the newcomers further strengthen the group's product range.

LIP, based in Bradford, Yorkshire, makes branded plastic and glass sample containers that can be used only once. Customers include the NHS, universities and food and drugs companies.

In the year to 30 September, LIP made taxable profits of pounds 695,000 before directors' pay on turnover of pounds 4.4m. Net assets amounted to at least pounds 1.1m. Protean is initially paying pounds 2.9m in cash for the business and another pounds 1.3m is linked to profits targets over the next two years.

Techne makes laboratory equipment used to control temperatures. Applications range from genetic research to industrial processes.

Although Techne is registered in the US, manufacturing is carried out in Britain where it employs 78 staff. It made taxable profits of pounds 825,000 on sales of nearly pounds 7m for the year to 31 March. Net assets were pounds 1m.

The deals are in line with Protean's strategy to develop into a broadly based supplier to the international research community - a huge market that is difficult to penetrate.

Since Mr Spink's arrival four years ago, Protean has steadily diversified away from its core water purification equipment business by astute acquisitions that have all boosted earnings within a year of purchase.

The latest two, taking the total to nine, came as Protean reported a 26 per cent jump in taxable profits to pounds 1.73m for the half year to 30 September on sales up 23 per cent to pounds 15m. Earnings per share improved 13 per cent to 4.21p.

City analysts expect profits to top pounds 5m in the year to 31 March. The shares, up 42 per cent this year, are an attractive stocking filler.