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Low & Bonar profits hiked after overcoming weak conditions

LOW & Bonar has produced a strong second-half showing to bring profits and turnover growth in line with expectations in its final set of annual results to be announced by departing chief executive Steve Good.

The materials manufacturer, whose Dundee-based yarns division makes artificial grass for football pitches, overcame weak first-half conditions in the European construction industry to hike pre-tax profits nearly three-fold to £17.8 million.

Turnover rose by 5.9%, to £403.1m, in a year which saw the group acquire Texiplast, a Slovakian civil engineering supplier, for £15.9m. It also set up a geotextile joint venture, Bonar Natpet, in Saudi Arabia.

The results reflect the progress made Bonar & Low's Tayside yarns operation, which turned an operating loss of £1.8m into a profit of £0.5m.

The division, which also supplies high-end carpet manufacturers such as Axminster, saw turnover rise by nearly 24% to £32.8m. It employs 130 staff and accounts for 8% of group sales.

Mr Good, who will step down in the second half of the calendar year, said: "This time last year, I was talking to people saying we were confident that we can improve it [yarns] significantly this year, and that's what we have been able to do. We have grown sales and improved efficiencies and productivity and got the business back into the black.

"We have more things to do to get its financial returns closer to what we target for the group as a whole, and will continue to do things to make those happen."

Mr Good noted the most acute challenge the company faced over the period came with weak conditions in the European construction industry in the first half. He said this particularly affected its Bonar business, the biggest in the group, because of its focus on that market. Bonar saw operating profits slide by 8% to £23m, on turnover up 2.9% to £245.6m, with Mr Good stating it had recovered well in the second half.

Growth was seen by Low & Bonar in its coated fabric division, which supplies products such as side curtains for lorry trailers and advertising banners, with operating profit up 13.1% to £12.1m, and revenue rising by 8.2% to £124.7m.

Asked to assess the group's performance, Mr Good said: "We are pleased with where we have got to for the full year. We had a difficult first half because of a late start to the construction season in Europe, which left us a lot to do in the second half, but we are pleased we were able to do that and get across the line with the expectations intact, with a little help from FX (foreign exchange) to get there.

"We are clearly pleased that we have been able to do that and grown profits and sales again this year and upped the dividend.

"But I think more importantly, the momentum we had in the second half and the things we have been doing to invest in the business, which are already paying dividends and will continue to do in 2014 and 2015, are well-placed to come through."

Asked to comment on the reasons for his departure, Mr Good said: "The first thing to say is the business is in good shape and the results are good and opportunities for continuing that are strong. So I think it is a good time from that point of view.

"But it is a personal decision to rebalance the various parts of my life. [I have spent] the last 15 years living out of a suitcase, so the time has come for me to think about doing something different. That will happen some time to the end of this year as [we make] the transition to a new CEO."

Shares closed down 2.25p at 84.25p.

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