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Wagons roll as big loss turns into pounds 21m profit.

Midland engineering group Wagon got off to a roll yesterday with a sharp recovery in profits.

The Birmingham-based company, which concentrates on car parts and storage shelves, turned in headline profits of pounds 21 million compared to a pounds 47 million loss the year before.

Without the higher costs of translating overseas profit into sterling, profits would have risen by an extra pounds 1 million, while a small loss on businesses that were sold cost another pounds 1.6 million.

Chief executive Mr Nick Brayshaw, who has spearheaded the recovery since his arrival last year, said the aim was now to concentrate on growing Wagon's three core businesses: automotive door systems, automotive pressings and storage systems.

"We are getting the balance right between delivering profit growth ahead of forecasts as well as restructuring the business," he said.

"You can't just remain a Midlands automotive supplier; that is increasingly a contradiction in terms."

In April, Wagon announced the pounds 47million purchase of German car components business YMOS Door Systems to add to its Edward Rose business in Birmingham and Farnier Penin in France.

This will leave gearing at around 50 per cent, but strong cash flow is expected to quickly bring this down to a level where further acquisitions are likely.

Mr Brayshaw said European markets, where Wagon produces around half its output, were showing particular growth.

"Mainland Europe has been very weak for some time, but there are definite signs of recovery now," he said.

Nevertheless Wagon admits the need to grow turnover - broadly flat at pounds 304 million - and said its precision engineering division lacked critical mass.

The company denied plans to sell the two businesses in the division, pointing out both were highly profitable, but said "ways to develop these businesses were being explored".

Shareholders will receive a final dividend of 5p per share, leaving the total for the year unchanged at 12p.

The company also announced it was changing its name from Wagon Industrial Holdings to just Wagon.

Williams de Broe analyst Mr Philip Shepheard demonstrated City approval by increasing his profit forecast for this year by more than pounds 1 million to pounds 25.5 million, and shares also jumped up 4p to 380p after the better-than-expected results.

"The business seems to be on a very sound basis now," said Mr Shepheard.

"My only personal concerns are about how well they can cope in the UK automotive market while sterling remains so strong".

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Publication:The Birmingham Post (England)
Date:Jun 24, 1998
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