Bottom Line: BTR figures can appease sceptics

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The Independent Online
THE LESSONS of last September have obviously been taken to heart by BTR.

Then, a downbeat trading statement and a mean-looking 6.4 per cent dividend increase sent the shares down 17.5p. Yesterday it accompanied its more upbeat statement with a whopping 19 per cent increase in final dividend and was duly rewarded with a 10p rise in its shares to 387p.

Its generosity was doubtless also aimed at appeasing the sceptics who fret about BTR's debt and use of provisions. The figures alone should be enough to do that.

True, it did use pounds 197m of provisions in arriving at the 1993 profits and created a further pounds 54m - about a tenth of the cost - on the Rexnord acquisition. True, also, that moves to outlaw the use of pre-acquisition provisions will make the performance of future Hawker Siddeley-style acquisitions look patchy until integration is complete.

But the pounds 128m of acquisition provisions in BTR's accounts pale into insignificance compared with the pounds 5bn-plus in Hanson's. And the fact that BTR, unlike Hanson, managed to hold its underlying trading profits despite the economic gloom underlines its management skills, provisions or not.

The cash performance was also strong enough to silence the doubters. Almost pounds 200m of free cash flow helped to cut borrowings from pounds 2.17bn to pounds 2.06bn despite a net pounds 750m of capital expenditure and acquisitions, including debt acquired. With margin improvement likely as its markets recover this year, BTR's reluctance to tie up much of its debts in fixed rates looks sensible.

On forecasts of pounds 1.4bn, excluding the pounds 120m gain on the Graham float, the shares are on a prospective multiple of 17.3 times. That may look high, but the premium is justified by predictions of a further 14 per cent profits leap next year, and - if yesterday's dividend rise is anything to go by - a generous 4.4 per cent yield.

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