The proposed takeover of Finlay, the Northern Ireland building material firm, by Readymix, the Irish subsidiary of RMC, a British construction group, has been greeted positively. And indeed it should be as it represents a further expansion of its activities - geographical expansion is limited as it would not be allowed to compete with its parent.

Davy Stockbrokers, in an analysis of the deal, reckons it will add around €0.1 million (£80,000) to profit before tax this year, after goodwill, representing a contribution of less than three months. The contribution is expected to be some €1.6 million in the following full year, after financing costs.

This has led to a 5 per cent earnings upgrade. And for 2000 the review has increased its profits forecast from €21.8 million to €24.1 million. While the consideration of £21 million sterling (€31.5 million), including debt, is on a high profit multiple, it is expected to give Readymix scale benefits, and access to substantial quarry reserves. However, the big problem for building material companies expanding in Northern Ireland, is the small profit margin generated in that area. Last year, Readymix's activities in the Republic, benefiting from the booming building industry, boasted a trading margin of some 15.8 per cent. In contrast, its activities in Northern Ireland and the Isle of Man, only managed half of that, a puny 7.8 per cent.

While competitive pressures in the Republic are likely to keep a cap on the margins in the domestic market, they should increase in Northern Ireland, but not by much. The Northern Ireland and Isle of Man activities accounted for around 46 per cent of group sales last year (this will increase after the Finlay acquisition), but only 30 per cent of operating profits. Obviously substantial benefits would accrue to Readymix if it could generate similar margins in Northern Ireland. But with the political uncertainties, that is not going to happen over the foreseeable future.