US sales surge shows dividends for Tomkins

Strong sales growth in America helped Tomkins, the handguns, mowers and bread-baking conglomerate, to a 19 per cent rise in earnings in the six months to October.

Greg Hutchings, chairman, said earnings had grown at almost four times the market average in the last 10 years as he promised a dividend rise for the full year of at least 15.2 per cent.

He said profits and return on capital had increased in two-thirds of Tomkins' 72 subsidiary companies.

Tomkins ended the half with net cash of a little over £200m but Mr Hutchings insisted that the group was in no hurry to make any further acquisitions. The last big purchase was that of RHM, the Mother's Pride to Mr Kipling cakes group, bought two years ago.

Profits in the first six months rose from £93.8m to £114.5m, struck from turnover up 17 per cent at £1.79bn. Earnings per share increased 19 per cent to 6.59p and the interim dividend was 16 per cent higher at 2.43p.

Sales in America grew 32 per cent, benefiting from the acquisition in March of Noma Industries, the lawnmower maker, which is being integrated with the existing Murray business. In the UK sales were flat and in the rest of Europe they fell almost 10 per cent.

In the US, fast-growing sales of recreational vehicles and mobile homes boosted profits in the best-performing division, industrial products, by 49 per cent to £25.7m. Heavy investment through the recession was reflected in margin growth from 7.8 per cent to 9.3 per cent as conditions improved.

Profits from RHM's milling and baking operations jumped from £7.1m to £11.1m as the operating margin increased from 2.1 per cent to 3.3 per cent. Mr Hutchings said the improvement, despite a small decline in sales, had been achieved by selling loss-making shops and resisting the temptation to chase market share at the expense of profit.

The division is now two-thirds of the way through a three-year rationalisation programme, which had cost a further £17.4m in redundancies and asset write-downs during the half. About £40m of a £90m provision at the time of the acquisition remained to be spent.

When RHM was acquired it was estimated to be running with 12 per cent overcapacity but was now operating flat-out following the closure of six bakeries and seven distribution depots.