Tomkins doubles profits to pounds 94m

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The Independent Online
TOMKINS, the lawnmowers to cakes conglomerate, once again exceeded City expectations when it announced pre-tax profits almost doubled to pounds 93.8m at the half-way stage. But a cautious statement on trading in the UK, coupled with continued concern about its acquisition of Ranks Hovis McDougall, pushed its shares down 3p to 259p.

RHM, acquired a year ago, contributed operating profits of pounds 38.5m, accounting for much of the advance. But the old Tomkins businesses also raised their contribution from pounds 39m to pounds 47.4m, helped by the US recovery.

Greg Hutchings, chief executive, was bullish about the future - a confidence reflected in a 15.2 per cent increase in dividends to 2.08p a share, on earnings 23 per cent ahead at 5.53p.

Profits from the industrial products division and the US housing industry rose a third to pounds 19.6m on sales 24 per cent ahead at pounds 220.6m. Ian Duncan, finance director, said the increase demonstrated the operational gearing of the group's businesses. 'As our markets recover, we expect to see that effect elsewhere,' he said.

RHM's baking and milling business made just pounds 7.1m operating profit on sales of pounds 343.1m. Mr Duncan said the 2.1 per cent margin and the return on capital were 'totally inadequate'.

More than 2,800 jobs - 11 per cent of RHM's workforce - have been shed since it was taken over, and more are likely to go. Tomkins has shut 12 bakeries and 10 grocery plants - half of them in the US - and is closing RHM's UK and Chicago headquarters.

These closures have used up about pounds 20m of the acquisition provisions established when the deal was completed. The remaining pounds 68.9m is likely to be used over the next 18 months.

The results encouraged analysts to increase forecasts from pounds 250m to pounds 260m.

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