INTERNATIONAL Investment and Underwriting, the company set up by entrepreneur Mr Dermot Desmond, has emerged as substantial shareholder in the underperforming engineering companies Barlo and Jones Group. International Investment and Underwriting (IIU) holds 3.3 per cent of the engineering and shipping company Jones Group and 3.5 per cent of Barlo, the radiator and plastics group, according to the share registers of the two companies. IIU's stake in Barlo is worth just under £1.8 million and the Jones Group investment just over £775,000.

Both companies have been poor performers on the stock market in the last 12 months and IIU is understood to have acquired its shares, which are held through nominee accounts, recently. However, it refused to comment yesterday on when it bought the shares or whether they were bought on its own behalf or for a client.

The managing director of Barlo, Mr Tony Mullins, was not available for comment yesterday and neither was Jones Group chief executive, Mr Pat Nevin.

Jones and Barlo halve substantial radiator manufacturing businesses which have both been hit by the prolonged recession in their main market, the British construction sector. Both stand to gain if this sector of the economy recovers.

However, analysts in Dublin noted yesterday that the two companies were also potential takeover targets, given the underlying strength of their businesses.

Barlo has around 20 per cent of the British radiator market and 10 per cent of the overall European market. Its other main area of activity, plastics, has been hit by the rising cost of raw materials in recent years. Barlo's shares last traded at 32p compared to a high of 102p in 1994. It might make an attractive acquisition for a British-based construction company, according to one analyst.

Jones Group has announced two major profit since October and its shares last traded at 175p, compared to a high in 1991 of 405p. As well as being a specialist radiator manufacturer, Jones Group also has interests in shipping and fuel distribution.

A break-up of the Jones group would unlock some of the company's value for shareholders, according to analysts. One possibility being mooted yesterday was the sale of its radiator division to Barlo and the taking into private ownership of the shipping company by the existing management. The shipping company is reported to be performing well.

IIU was set up by Mr Desmond after he sold his stake in stockbrokers NCB to Ulster Bank at the end of 1994.