Tomkins to keep on buying and cutting

Tomkins, the industrial, automotive and construction products group, said yesterday that it remained on the acquisition and cost-cutting trail after reporting a strong set of first-half results.

Jim Nicol, Tomkins' new Canadian chief executive, declined to specify how much firepower he had but in the past the company has said it could spend up to £1bn without stretching its balance sheet too far.

At the same time, Tomkins plans to shed a further 800 jobs this year as part of a continuing efficiency drive. In the half-year to the end of October, it axed 10 factories, mainly in the United States, and 900 jobs.

Mr Nicol said the group was looking for acquisitions in both North America and Europe in the air systems and automotive power train markets and would typically be looking to buy companies with a turnover of $300m to $500m (£190m to £310m).

"There are lots of businesses on the market at the moment, but the problem is quality. We would prefer to buy something good and make it excellent rather than take on a basket case and have to fix it up," he added.

Mr Nicol was speaking as Tomkins reported a 9 per cent increase in underlying operating profits for the six-month period to £154.4m, which was at the top end of market forecasts. Analysts said the group had turned in a good performance in the face of weak markets and Tomkins shares closed 5 per cent higher at 207.25p.

The weakness of the US dollar hit Tomkins, which generates 70 per cent of its sales in North America, slicing £10m off pre-tax profits, which came in at £143.3m – up 5 per cent.

The group said it expected its key markets this year to remain flat overall with modest growth in industrial and automotive aftermarkets and industrial equipment but a decline in US car and construction markets.

Mr Nicol indicated that Tomkins was looking for buyers for its two US materials handling businesses, Dearborn and Mayfran. The companies have combined sales of $200m and manufacture equipment such as industrial conveyor belts and pallets used in car assembly.