Shares in engineering group Unidare jumped 18p to close at 223p after the company announced a 17 per cent increase in profit before tax and exceptionals to £6.9 million for the year ended September 30th.
Operating profits on continuing activities improved by 28 per cent to £7 million despite a £250,000 deficit on foreign currency translations due to the strength of the pound.
The chief executive, Mr Paul Duggan, said the results, which showed a rise in operating margins to 5.6 per cent from 4.8 per cent, provided "encouraging signs of recovery" after a stagnant first-half performance and a slump in profits the previous year.
"1995/96 was a poor year for Unidare but we have managed to climb back, particularly in the second half," he said.
The company announced a 14 per cent increase in adjusted earnings per share to 24.21p. Final dividend rises 4.4 per cent to 12.8p per share, bringing the total dividend to 17.4p.
Analysts said the results, which were slightly ahead of expectations, were good and welcomed the margin improvement in particular. Riada Stockbrokers plans to upgrade its 1998 earnings per share forecast by around 10 per cent, while Goodbody is forecasting EPS of 26.6p next year against 23.0p previously.
Unidare's engineering supplies distribution division was the main driver of growth, recording a 30 per cent increase in operating profits to £5 million.
Sales at US wholesaler Nasco grew and margins continued to recover with a particularly strong performance in the latter months of the year. UK distributor Oerlikon enjoyed steady sales growth and recovered market share lost in 1996.
Unidare's engineering products division reported more modest growth, despite a record year for Dutch heating group Daalderop, as the adverse translation of the strong pound took its toll. Operating profits increased slightly to £3.1 million from £2.9 million.
Mr Duggan said the currency position was now about neutral for the group, with gains by the dollar and sterling offset by continuing weakness of the guilder.
Unidare hopes to make further progress in the current year, with benefits expected from its capital investment programme now near completion. It spent £1.5 million in excess of depreciation during the year, particularly on information technology systems. The group, which acquired Eland Electrical, a British wholesaler of welding accessories, for £2 million in the first half, is also on the lookout for earnings enhancing acquisitions, although Mr Duggan said nothing was imminent.
Unidare, which had net cash of £3 million at year-end, could afford to spend £15-£20 million on acquisitions but would also be influenced by the amount of goodwill involved, he said.
The company's acquisition search is focused on the US and the Netherlands where it already has operations. It is seeking acquisitions in its core businesses, preferring transactions of reasonable scale.
The sale of Unidare's Kaye site in London to Tesco is still outstanding and remains subject to planning permission, Mr Duggan said.
He also said that the issue of board representation had not arisen with financier Mr Dermot Desmond's International Investment and Underwriting Ltd (IIU), Unidare's largest shareholder with an 18.7 per cent stake.
Mr Duggan said Unidare welcomed all those who invested in the company and saw value in it. It had the same interaction with IIU as with other institutional investors, he added.
