McKechnie ahead as turnover falls

McKECHNIE, the plastics and metal components group, managed to boost earnings for the year to 31 July despite a 5 per cent drop in turnover.

Pre-tax profits rose to pounds 24.1m ( pounds 19.9m), and earnings per share jumped to 20.7p (17p). But the final dividend was 9.75p, giving an unchanged 14.75p for the year. The company said it wanted to increase dividend cover, now at 1.4 times, closer to twice.

Most of the increase in profits came from lower interest charges and cost cutting. McKechnie sold its European metals businesses in the previous financial year, eliminating borrowings with the proceeds.

Michael Ost, chief executive, pointed out that the fall in turnover resulted entirely from the sale of those businesses and that turnover at the continuing businesses was the same as the year before. He added that the order books for this year in the main divisions were slightly up on last year.

Mr Ost described the financial year just gone as one of consolidation: 'With the recession continuing to affect most of our markets management efforts were concentrated on cash control and cash generation.'

The company planned to expand, especially on the Continent and in North America. But Mr Ost added that the group had yet to find an acquisition at a realistic price, although a 40 per cent minority stake in its New Zealand subsidiary was bought.

Sales in the plastics division, which is now the core business, were hit by the problems of the automotive industry, and pre-interest profits fell from pounds 10.3m to pounds 8.5m.

Mr Ost said he was hopeful of a possible upturn in the US economy, but was gloomy about prospects for the UK.

'We are assuming that things will not get better in this financial year and perhaps not until 1994,' he said.

The shares rose 10p, but closed 8p up on the day at 326p.