Hard times in Europe keep profits down at Hepworth

TOUGH trading conditions in Europe restricted underlying profits growth at Hepworth, the building materials and boiler group, to 3 per cent as sales stagnated in the first half to June.

Pre-tax profits of pounds 35.6m, up 30 per cent from pounds 27.5m, were flattered by lower interest payments after the conversion last year of some capital bonds into shares.

The market focused on another gloomy assessment of prospects. John Carter, chief executive, said: 'Conditions are expected to be similar to those in the first half.'

Hepworth's shares have fallen 35 per cent since March when it first warned of the slow pace of recovery in the UK construction market. Yesterday they closed 8p higher at 296p.

Overcapacity and pricing pressures in the German clay pipe business took the shine off a better performance from the UK building materials operation, with profits from the division falling from pounds 11.1m to pounds 10.8m. Refractories, which makes linings for furnaces, also slipped from pounds 3.7m to pounds 2.1m.

Better volumes of gas boilers boosted home products, where profits rose from pounds 5m to pounds 5.9m. Garage door and ladder sales were slow.

Saunier Duval, the European boiler and water heater maker, improved marginally from pounds 12.5m to pounds 13m as the French market picked up. Spain is still struggling and trading is slow in the Netherlands.

Gearing fell from 12 per cent to 6 per cent, causing analysts to question why Hepworth had not attempted to buy earnings growth through acquisition. Earnings per share rose 12.1 per cent to 10.2p (9.1p) and the dividend was left unchanged at 5.5p.

Forecasts for this year suggest pre-tax profits of pounds 73m followed by pounds 83m in 1995 and compared with pounds 58.3m in the year to December 1993.