Investment: McKechnie's widgets resist the slowdown

MANUFACTURERS are in limbo. Everybody keeps telling them a recession is just around the corner. But so far, results show no signs of a slowdown. They respond by putting on a brave face and, when asked about the future, gently shrugging their shoulders.

McKechnie, the manufacturing group which has earned the nickname "Widget plc" in the City because of its broad range of low-cost, high-volume products, was in shrugging mode yesterday. The chairman, Vanni Treves, said the coming year would be a "testing one for manufacturers" but argued that the company should be able to resist the worst of the market's vagaries.

Results for the year to July were certainly encouraging. The specialist and engineering products divisions, which make things like fasteners for the aerospace industry and wheel trims for cars, both produced 20 per cent profit growth. But operating profits in the consumer products unit fell by 14 per cent.

McKechnie yesterday made much of its lack of exposure to the Far East - it sold its Australasian business for pounds 63.5m in August - and its strong position in the still-booming aerospace industry, where it supplies Airbus, Rolls-Royce and Boeing. The sector accounted for 30 per cent of sales last year. But Asian devaluations have also caused a flood of cheap products in other markets, while the aerospace industry is inherently cyclical.

With a solid balance sheet, McKechnie has plenty of scope for acquisitions. It is keen to expand in aerospace and engineering plastics, where it reckons quality and reliability, rather than price, are the main selling points.

McKechnie shares bounced 29p to 295p yesterday in a rising market, but are still down 45 per cent on their 12-month high. On a forward earnings multiple of seven the shares are unlikely to fall much further. Until the economic outlook becomes clearer, however, there will be few buyers.