Electrical and engineering services group Dowding & Mills says it is considering possible takeover offers after reporting a £400,000 full year profits slide to £10.5 million pre-tax, writes Ben Cobley.

Birmingham-based Dowding & Mills (DVM) today issued a statement that it 'is undertaking a review of all of [its] strategic options, including possible offers for the company'. In effect, as Close Brothers adviser Mark Barrow points out, 'this basically means that they are into an offer period'.

No bids have been received so far, but the process of trying to find one has begun. Also under consideration are alternatives such as management buyouts.

The reason for the move is familiar to many smallcap engineers. The share price has languished because of a general lack of investor interest over the past few years following the departure of certain institutions.

However, the company's performance during the year to 30 June was not at all bad, as it managed to hit broker forecasts of £10.5 million in pre-tax profits (excluding £2.3 million in costs from restructuring and amortisation of goodwill). Profits fell from last year, but a restructuring of tax losses and the acquisition of certain minority interests meant that earnings attributable to shareholders (again, excluding exceptional costs) showed a slight increase to 4.78p.

Chief executive Martyn Habgood points out that cost cutting has so far saved about £800,000 during the year. This has enabled the company to meet forecasts, but the current trading environment is difficult.

Restructuring will save about £3 million on an annualised basis, and some growth is forecast for the year. Investec analyst Richard Dyett expects about 5p of earnings per share in 2001-2.

Turnover was up 4 per cent to £137 million during the year. The final dividend has been maintained at 1.56p, making for a total of 2.36p, a yield of 8.5 per cent at the current price of 28p (up 1.5p on the day).

Net assets of £50.2 million on the balance sheet suggest that a takeover bid could bring some reward to shareholders. However, as Barrow points out, 'it is early days'.