The Investment Column: Delta

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The Independent Online
DELTA, the engineering group, has a habit of bringing the market sobering news. The maker of pipe fittings and switching gear warned earlier in the year that conditions in key markets remained tough. So no surprises yesterday when it unveiled an 8 per cent drop in pre-tax profits to pounds 19.8m.

The group says it is in the final stages of a three-year shake-up to shed non-core operations. It has sold off its cable and car-parts divisions, boosted its presence in the electrical sector with the acquisition of Holec Holland and cut costs. This year 600 jobs are to go, leaving a pay- roll of 10,500.

Management has set an ambitious end-2000 target of 10 per cent annualised growth and return on sales. But is now the time to buy?

The positive evidence comes from the industrial services division, which contributes the bulk of operating profits. Its targets are already being met, even though turnover stalled at pounds 114m.

But the electrical and plumbing divisions are less encouraging. Both saw profits fall in the period. The backdrop for trading remains challenging in many markets. While Europe and the Asia-Pacific are forecast to pick up, no significant improvement will be seen near-term.

There have been occasional whispers that Delta could a takeover target, with rival TT Group touted as a buyer. But TT built a modest stake in Delta last year, only to sell it later.

Analysts estimate full-year profit before tax at pounds 38m. The acceleration of Delta's share price, yesterday down 0.5p at 154p, seems months off and there is little reason to buy now.