TI sales as good as expected

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TI Group has become such a serial out-performer that even a 19 per cent increase in underlying profits in the first half did not budge the share price. That seems a churlish reaction to a company that in 10 years has transformed itself from a Midlands metal basher, with interests spread from Raleigh bicycles to Russell Hobbs kettles, to a global engineer dominant in its main markets.

With margins up, cash flow strong and a healthy order book, TI is in an enviable position. The one fly in the ointment is a somewhat gloomy outlook in Europe, particularly in Germany and France. Perhaps this is why the shares were unchanged at 525p. But even this will be compensated for by a US market that looks resilient and growth opportunities in the Far East.

Pre-exceptional profits of pounds 103.7m were struck on sales 4 per cent ahead at pounds 895m in the six months to June, with all three divisions showing organic sales growth of 7 per cent. John Crane, the mechanical seals business, out-performed some patchy markets, particularly in Europe, and increased market share.

The Bundy tubes business benefited from better sales to US car and truck manufacturers, which offset a flat European car market, while the omens look most encouraging in the Dowty Aerospace division which makes propellers and landing gear. With Boeing and Airbus set to almost double their orders in the next four years Dowty will get its share.

With pounds 71m net cash, TI needs to make its balance sheet work harder. Bolt-on acquisitions are promised.

Profits of around pounds 210m in the full year are expected, giving a forward rating of 18. A premium to the market but good value for a quality player.