The Investment Column: FKI opens door to further deals

Jeff Whalley and Bob Beeston, the no-nonsense northern industrialists who head the management team at FKI, have proved canny investors of their shareholders' money. They got full marks from most observers for refusing to overpay in the pounds 230m bid battle for Newman Tonks earlier this year, choosing to walk away instead. But that was only par for the course. It took the pair a year to start spending the pounds 137m raised in a 1995 rights issue, as they searched for keen deals to enhance the existing door furniture to engineering operations.

The fruits of the resulting acquisitions last year, principally the pounds 182m purchase of the Hawker Siddeley electrical power operations in November, have yet to be fully reflected in the results. Yesterday's figures showed pre-tax profits in the year to March rising 24 per cent to pounds 112m, before pounds 24.5m of exceptional charges relating to rationalisation at Hawker and the costs of the Newman bid. Acquisitions chipped in pounds 12.2m, but there should be more to come. FKI believes there could be pounds 15m to pounds 18m extra profits from Hawker alone over the next few years.

Further deals are on the cards. Mr Beeston, chief executive, said they could spend up to pounds 150m this year, but were in no hurry. FKI's firepower will be enhanced if it carries through the sale of the automotive division, which analysts reckon could be worth pounds 120m.

Meantime, there should be plenty more organic growth to go for. Group sales have burst through the pounds 1bn barrier and orders are running at an annualised rate of pounds 1.2bn. The target is to raise the proportion of the group's business in market leading areas from 47 to nearer 75 per cent over the next three to five years.

So, with profits of pounds 132m in prospect this year, the shares, up 4.5p at 179p, look good value on a forward p/e of 11, despite residual fears about the group's exposure to the US market.