Victaulic hit by British Gas cutbacks

SHRINKING capital expenditure by British Gas has led to a decline in profits at Victaulic, the pipelines maker, writes Robert Cole.

Pre-tax profit fell 13 per cent to pounds 11.8m for the year to 31 December 1993.

Orders to British Gas declined by 25 per cent last year. David Stewart, managing director, said pipe sales to British Gas were 60 per cent down on 1991.

Victaulic maintained its overall sales figures by replacing British Gas business with increased exports. However, the new business was won at lower prices. Turnover was the same at pounds 101m but the operating profit margin fell from 12.7 to 11.4 per cent.

Victaulic makes the wide-bore yellow plastic pipes used to replace gas and water mains. British Gas has been uncertain about its future over the past two years and cut back investment in the pipe network accordingly.

It has been confirmed that British Gas will be allowed to operate the network, but regulators have not decided how much the company will be able to charge rivals to use the system. Until a charging structure has been decided, British Gas will hold back on investment.

Earnings per share fell 9 per cent from 20.3p to 18.4p but Victaulic pushed the dividend up 2.5 per cent to 8p.

The shares doubled in price in 1991 as investors enthused about Victaulic's recession- beating qualities. However, prices have fallen from a peak of 402p in 1992 to 314p yesterday and over two years have underperformed the stock market average by 40 per cent.