TI ready for next acquisition

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The Independent Online
Specialist engineering group TI dropped strong hints that it was ready for another large acquisition yesterday, as it announced booming profits and strong sales increases in its three main divisions, writes Nigel Cope.

Announcing pre-tax profits up 25 per cent to pounds 87.4m for the six months to June, chairman Sir Christopher Lewinton said TI would stick to its three-year cycle of making a sizeable acquisition, then reducing gearing and integrating the purchase.

It is three years since TI's pounds 600m purchase of Dowty, and gearing has been reduced from 42 per cent last year to just 5 per cent. Debts have been reduced from pounds 136m to pounds 20m, clearing the way for another deal.

"We don't have to do any deals at all due to our strong organic growth," Sir Christopher said, "but we will continue to look for bolt-on acquisitions and look at other opportunities as they present themselves. We are well placed."

One analyst commented: "They are clearly back on the acquisition trail."

The City was impressed by TI's figures. The three main divisions - John Crane, Bundy and Dowty Aerospace - all saw like-for-like sales increase by more than 10 per cent. Profits in all divisions rose more than 20 per cent. Margins have increased from 10.6 per cent to 11 per cent in spite of higher redundancy costs.

However, Sir Christopher said market conditions were mixed and warned that a slowdown in the US automotive markets could affect demand.

Litigation is continuing in the US, where TI has been served with writs alleging that one of its subsidiaries defrauded the US Air Force of more than pounds 12m. TI is vigorously defending the action.

"These are very good figures,"one City analyst said. "The only question is whether TI can reproduce them in the second half." The shares finished 5p higher at 424p.