Unitech purchase shows early results for Siebe

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The Independent Online
Siebe, Britain's biggest engineering group, vindicated its pounds 520m acquisition of Unitech earlier this year, saying that the synergy benefits with the electronic power supplies manufacturer were coming through faster and better than expected.

Allen Yurko, chief executive, said immediate benefits from cost savings, including cross-purchasing and cross-marketing with existing businesses, would amount to between pounds 5m and pounds 10m initially, rising to between pounds 10m and pounds 20m within two to three years.

The real benefits would come from the sale of Siebe products in areas such as the Far East and Siebe selling Unitech products into its traditional heating, automotive and ventilation markets in Europe and North America. The company had not yet chosen "an integration path" for Unitech's electronic connectors operation yet, he said, but it was "not broken" and was a good business. They had not decided to sell it, he said.

The comments came as Siebe revealed it had broken three of its four targets last year with results for the year to 6 April showing pre-tax profits jumping a fifth to pounds 331m. The shares added 11p to 879p. The aim of cutting costs by 5 per cent, growing sales by 10 per cent and organic profits by 15 per cent were all comprehensively beaten. The group fell down on its attempt to improve stock turn by a fifth, managing a 14 per cent improvement.

Mr Yurko said the key message with the results was that everyone in the company was "really bullish for 1997", while costs would continue to be cut. "We are going to try, try again. We are going to keep the pressure on."

Operating margins eased from 14.4 per cent to 14.3 per cent last year. But Mr Yurko said increased research and development expenditure was worth 0.4 percentage points off the margin, while acquisitions tended to dilute returns until they were brought up to group levels. Without those factors, the growth would have been a full point to about 14.9 per cent, he said.

All divisions were ahead last year. The biggest, control systems, which supplies process controls for petrochemical plants, saw its profits jump from pounds 127m to pounds 156m last year. Siebe ascribed much of the growth to the technological lead of the Foxboro subsidiary in the US. The order book there is up 30 per cent and the advanced I/A system has continued to win market share and now claims a figure of over 13 per cent, up from 7 or 8 per cent four years ago.

Elsewhere, temperature and appliance controls used for air conditioning and whitegoods and the like shrugged aside patchy North American and European markets to record profits up from pounds 128m to pounds 141m. Although volumes across the Atlantic rebounded in the fourth quarter, Siebe warned that European markets remained subdued.

Colin Fell of Kleinworth Benson Securities described the figures as "consistently boringly excellent". The results were accompanied by a 10 per cent increase in the final dividend to 8.87p.