Evode takeover lifts Laporte through period of flat trade

KEN MINTON, chairman of the chemicals company Laporte, admitted yesterday that underlying trade in established operations was flat last year.

The acquisition of Evode, the glues manufacturer, meant Laporte's overall profit figures rose considerably. However, if Evode's contribution and flattering exchange rates are discounted, sales and profits were unchanged.

Group profit before tax increased 24 per cent to pounds 107m for the 12 months to 2 January.

Total operating profits grew by pounds 38m to pounds 116m. However, acquired companies added pounds 33m and currency movements another pounds 5m.

Mr Minton said yesterday: 'The core businesses performed solidly despite difficult trading conditions.' He added: 'We have successfully integrated the Evode businesses as promised at the time of the acquisition.'

Over the past 15 years Laporte has transformed itself from a handler of commodity chemicals to a speciality producer. It now supplies a vast range of companies from pharmaceutical manufacturers to makers of industrial cleaning fluids. The more specialised nature of the business gives Laporte wider profit margins.

Profit margins across the group last year declined from 14.8 to 13.2 per cent. Mr Minton said the drop was due to the incorporation of Evode. Action by Laporte, he said, expanded margins on the newly acquired rival from 4 to 11 per cent.

Most of the margin enhancement has come through cost-cutting. Staff levels were reduced by 25 per cent. Laporte set aside pounds 25m to cover the cost of integrating Evode. About half was spent writing down the value of assets acquired. Of the pounds 12m provided for the rationalisation of operations, Laporte has spent pounds 7m.

Rules covering accounting of acquisitions mean rationalisation costs can be incurred without affecting profits. Laporte spent pounds 250m on Evode in a mixture of cash and shares. But despite increasing the number of shares in issue, earnings per share rose by 6 per cent to 41.4p. In a falling market, Laporte shares closed down 20p at 794p.