The Investment Column: Siebe exudes confidence

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The Independent Online
Barrie Stephens can retire a contented man. In 33 years the long- serving Siebe chairman, who presented his last set of results to the City yesterday, has taken the industrial controls and appliances group from a tiddler with annual sales of pounds 1.4m to a global engineering giant turning over more than pounds 3bn.

On yesterday's evidence, that progress should continue. While other engineering companies grapple with the strong pound and the economic upheaval in the Far East, Siebe could hardly have sounded more confident.

Sceptics had viewed the acquisition of troubled process engineer APV last May as a sign that Siebe was running out of steam. Not so. In just four months under Siebe's management, the unit's margins widened by two percentage points to 5.5 per cent. They should hit 10 per cent some time next year - well ahead of schedule.

What about the currency? True, translating overseas profits into sterling knocked a cool pounds 19m off Siebe's bottom line. But this is a one-off accounting effect. In fact, cheaper currencies have given some of Siebe's overseas operations a welcome competitive boost.

That's especially true of the Far Eastern markets, which account for 17 per cent of the company's sales. Siebe says it hasn't seen any demand weakness, and sees the shake-out as an opportunity to snap up selective acquisitions in the region.

With organic profits - excluding the effects of currencies and acquisitions - rising by over 20 per cent, the charge that Siebe needs deals to fuel growth also looks thin.

Indeed, the company has ruled out any large acquisitions for the time being, saying management has enough on its plate. With the full benefits from APV and an internal efficiency programme still to come, brokers have pencilled in full-year profits of around pounds 524m. That puts the shares, up 38p to 1163p, on a forward price/earnings ratio of 18. Given Siebe's record, not expensive.