Clondalkin Group, the print and packaging company, has reported a 23 per cent increase in half-year pre-tax profits to a record £13.5 million as its heavy capital investment programme of recent years begins to pay off. The company, which bucked the general downward trend in its sector, reported strong growth in its existing business following investment of £40 million in the last two years and capital expenditure of £7.7 million in the first half.

It also attributed the increase in operating profit margins, to 7.8 per cent from 7.2 per cent, against the industry trend, to recent investments rather than prevailing market conditions.

Turnover increased by 12 per cent to £206.4 million while operating profits rose by 21 per cent to £16.1 million. The company said demand was strongest in Continental Europe, which accounted for 44 per cent of sales, followed by the US where sales represented 24 per cent of the total.

Clondalkin said its investments in Britain, which account for 22 per cent of sales, were beginning to pay off but it reported a slow start to the year in Ireland, the one division where operating profits did not increase because of weak demand in the commercial print operations.

Demand for packaging, which accounts for 74 per cent of the business, was stronger than in the printing division, the company said.

Chief executive, Mr Norbert McDermott, said Clondalkin's strategy for the future was to continue to invest in its existing businesses, to maintain its emphasis on high value-added products while continuing with its acquisition search in Europe and the US.

"We have the best acquisition pipeline we have ever had," Mr McDermott said, adding that Clondalkin would look at investments of up to £100 million.

Clondalkin announced a 10 per cent increase in its interim dividend to 2.90 pence per share. Earnings per share were up 20 per cent to 23.42 pence although Mr McDermott said the currency effect of translating profits from sterling, dollars and some European currencies into Irish pounds contributed some 4-5 per cent to EPS growth.

The share price closed 5p higher at 585p yesterday but it was well off the all-time high of 790p recorded in March, having failed to reflect the company's outperformance of its sector.

Clondalkin said it would have to market the company to new investors as Irish fund managers came under growing pressure to increase European holdings at the expense of stakes in many secondline Irish stocks.