BTR disappoints with warning of cuts

BTR, the conglomerate turned engineering group, dismayed the City again yesterday after warning of a further 1,100 job cuts following a set of first-half results ravaged by the strong pound and the economic downturn in emerging markets.

The admission that the results had not met BTR's own expectations together with its bleak assessment of conditions in its South American and South- east Asia markets helped prompt an 18 per cent fall in the shares and a rash of profit downgrades from analysts.

BTR employs 70,000 worldwide, including 12,000 in the UK. The latest job cuts come on top of 3,500 announced two years ago and will be accompanied by plant closures in the US and Europe and production focussed on lower- cost sites in countries like Mexico, Poland, India.

Already rocked by four profits warnings in a row since BTR's chief executive Ian Strachan embarked on his radical restructuring in January 1996, the verdict of the City was harsh and unforgiving. "If BTR was a horse it would be ... shot," said one analyst; another, it was one more chapter in BTR's "unending saga of pain". But Mr Strachan argued the results were in line with expectations, while the underlying strength of the group was solid with operating margins averaging 14 per cent and return on capital reaching 12 per cent.

With gearing down to 19 per cent, he added that BTR had pounds 2-3bn of firepower to add to its portfolio of automotive, power drives and control systems businesses through acquisition.

At the pre-tax level, the group slumped from a profit of pounds 516m last year to a loss of pounds 45m, after pounds 416m of exceptional losses on disposals. Underlying profits declined 12 per cent from pounds 349m to pounds 306m. Since January, 1996, BRT shares have underperformed the market by 70 per cent despite a programme that's seen pounds 5.8bn raised via disposals; pounds 1bn spent on acquisitions and pounds 2bn returned to shareholders.

BTR's finance director, Kathleen O'Donovan, said two thirds of the decline in profits was attributable to the strength of sterling and the deterioration in the group's South American and South-east Asia markets. The sharpest decline was in the automotive division where profits slumped by 27 per cent to pounds 47m. The General Motors strike cost pounds 2m, while the markets in Indonesia, Korea and Brazil all turned down sharply.

Leaving aside acquisitions, profits fell in all four main divisions, but Mr Strachan said the group profit before interest and tax of pounds 337m was bang in the middle of forecasts.

Outlook, page 17