Restructuring lifts Cookson interims

RESTRUCTURING in the wake of over-ambitious expansion in the 1980s helped Cookson, the industrial materials group, to double its pre-tax profits in the first half of the year, despite a 10 per cent fall in sales.

Taxable profits were pounds 34m, up from pounds 17m a year ago, on sales down pounds 67m at pounds 609m. The results reflect the benefits of disposals - including AJ Oster, founded by the father of Richard Oster, group managing director - and last year's pounds 82.8m rights issue as well as rationalisation and cost-cutting. Underlying profits from continuing businesses were 53 per cent ahead, while sales were up 2 per cent.

Costs were reduced by pounds 29m from the previous period, which helped margins improve from 4.6 per cent to 7 per cent. Mr Oster said that was 'not brilliant yet' and the aim was to achieve margins of more than 10 per cent throughout the group by the year 2000. Two-thirds of the businesses are achieving that already, he added.

The best performance came in ceramics, where profits rose 42 per cent to pounds 17m on sales up 5 per cent at pounds 166m and margins up from 9 to 12 per cent. Profits in the plastics division rose from pounds 7m to pounds 8m, on sales up pounds 10m at pounds 139m.

Net borrowings rose from pounds 142m to pounds 211m, equal to 53 per cent of net assets - or 72 per cent if the convertible preference shares are counted as debt. The increase was largely because of the acquisition of the 50 per cent stake outstanding in Stern Leach, the precious metals business, for pounds 46.2m. But interest charges fell from pounds 14m to pounds 9m because of the rights issue.

Ian Barr, finance director, said the group remained on course to reduce gearing - including the convertibles - to below 60 per cent by the year-end and to less than 50 per cent in the medium term. That would be done without the benefit of disposals.

Half of the group's profits come from the US, but the average exchange rate in the first half was similar to last year's so profits were unaffected. If the dollar remains weak, full-year figures could be affected, although this will be offset by the fact that 70 per cent of its debt is in the US.

Mr Oster warned that a return to more normal levels of business was 'undoubtedly some way off' but said the restructuring meant the group would benefit from any recovery. The interim dividend was maintained at 3p while earnings rose from 0.9p to 4.2p a share. The shares gained 12p to 135p.

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