FOREWARNED, it is said, is forearmed. While shareholders in engineering group Unidare may be concerned after annual profits almost halved at £4.4 million in the year to end September last, at least they cannot complain that they were not alerted by their board to the consequences on profitability of trading problems. Neither can they grumble about the return on their investment. Despite insufficient income to pay dividends out of last year's earnings, the group has drawn £563,000 out of reserves enabling it to maintain total dividends at 16.86p a share.

Chief executive Paul Duggan says that while dividends failed to be covered as a result of exceptional charges payments were covered by operating profits. Dividend policy, he says, also reflects management's "confidence about the future".

The sharp setback in annual profits from the previous £8 million is attributed to poor results from the engineering supplies distribution side and a £1.4 million write off following the disposal of the plastics business.

Engineering manufacturing and supplies have been a difficult market but trading conditions are improving. In the US and Europe profit margins tightened and while US subsidiary Nasco maintained sales there was a "significant" erosion of profit margins.

Overall group turnover contracted from £151.5 million to £131 million.

Although the outlook remain uncertain, Unidare, with net cash on hand of over £4 million, remains committed to growth by earnings enhancing asset purchases. Unidare remains hopeful of better times ahead with the group now having a "narrow and more focused" base from which to grow.