The Investment Column: First Technology

ENGINEERING and safety are about as unsexy as businesses get. No wonder Fred Westlake calls his safety engineering company First Technology. The name implies exposure to the so-called new economy. In reality, First Technology's fortunes depend on those age-old metal bashers, the car makers.

The expectation of recovery in the group's Far Eastern markets, where it sells crash-test dummies, has seen the shares almost double since January. But the real excitement of late has been the group's continuing expansion into safety sensors, including making automatic systems that switch headlamps on before tunnels.

First-half results showed March's acquisition of US-based Control Devices Inc - now just under half the business - sending profits almost 50 per cent higher. Both First Technology's divisions - sensors and safety systems - are growing at the same rate, the company says.

The question is whether First Technology can continue to deliver on its track record of 15 per cent compound earnings growth. In the near term the signs are positive. Demand from Korea and Japan for safety products is much healthier, while the company says the US election will help car sales.

There is also a potential blockbuster; a heater for cars with efficient and hence cooler engines. That has a 60,000-unit order from Delphi, the car components giant. Five cars, including the Renault Espace, will test the device.

While there will be more acquisitions in sensors, the risk remains the car industry's perennial pricing pressure. First Technology has so far offset this through higher volumes, but it may soon being losing the battle. Analysts expect pre-tax profits of pounds 19.7m and 22p per share in the full year, putting the shares - up 7p at 503.5p - on a forward price/earnings multiple of 23. That's a tad expensive, even for this engineer.

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