BTR opts for pounds 2.8bn disposal programme

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The Independent Online
BTR yesterday moved decisively to turn its back on its conglomerate past after announcing plans for a massive disposal programme involving nearly one-third of its pounds 9.5bn annual sales to leave the business focused entirely on its engineering activities.

The move, which will be accompanied by a "substantial" repayment of capital to shareholders, marks the final unravelling of the sprawling group covering around 1,000 businesses put together by Sir Owen Green, who, like Lord Hanson, created one of the most dynamic and acquisitive conglomerates of the 1980s.

But BTR appeared to run out of steam in the early 1990s and the latest sell-off is the second phase of a revitalisation programme initiated by Ian Strachan, chief executive, who was brought in in January 1996 with a brief to turn the group around. He has already disposed of businesses with around pounds 2bn of sales since unveiling a pounds 622m restructuring a year ago and last month announced that Robert Bauman, the chairman of British Aerospace, would take over BTR's chairmanship from next May.

The latest plans were warmly received by the stock market yesterday. BTR's shares, which had fallen by one-third since Mr Strachan's arrival, jumped 15p to 234p yesterday, adding more than pounds 600m to BTR's market value, although they remain well below the peak of 407p hit in 1993.

Mr Strachan said that, with most of the original plan to dispose of pounds 2.3bn of turnover complete, he was moving to accelerate the transformation of BTR. He was focusing on engineering because those businesses have the greatest potential for value creation for shareholders, given their leading positions and good growth prospects. Sales in the engineering businesses have grown at a compound rate of 16 per cent over the past five years, against 11 per cent for the operations being sold.

The group will end up with four businesses in automotive products, where it has a commanding position in sealing and anti-vibration systems, control systems, including batteries and meters, power drives and specialist engineering. The rest, covering a range of operations from glass and plastic packaging, through building products to laminates like Formica, are expected mostly to have been sold by the end of next year.

Some observers believe the new chief executive has bowed to pressure from the City to take more radical action to deal with BTR's problems than was unveiled last year. But he said yesterday: "In the 12 months since we announced it, we have made considerable progress and this is the logical extension of it."

He also played down any suggestion of friction with BTR's investors. "There is a continuing dialogue with the shareholders and, on the basis of the fact that they are the owners of the business, we listen to what they say. But they generally remain supportive of the strategy of focusing for growth."

One shareholder injected a note of caution yesterday, saying the sale of so many businesses would be "a huge task." He added: "We don't want a fire sale after all these years. This is always a temptation when management just decides to get shot of businesses."

One analyst suggested Mr Strachan had bowed too far to City opinion. "It smacks a bit of policy on the hoof", he said. "It smacks a bit of giving the City what it wants and the City loves action."

However, other analysts were more sanguine, suggesting that the planned moves could not lead to a re-rating of BTR's shares. Geoff Allum at Henderson Crosthwaite said: "I have always felt what Strachan was trying to do was the right thing. The only question was how long it would take him to get on and do it. He has accelerated that pace dramatically today."

Assuming proceeds from disposals come somewhere in the range pounds 3.5bn and pounds 4bn, he forecast that the shares could now go to between 280p and 320p.

The restructuring announcement accompanied interim figures showing pre- tax profits of pounds 540m for the six months to June, up from pounds 4m in the comparable period, which was hit by the provisions for the original restructuring programme.

Despite being earlier forewarned by a profit warning, analysts were disappointed with the results. The strength of sterling cost pounds 54m in translation and trading effects, but even stripping out exchange effects and exceptional items, profits slipped 5.7 per cent to pounds 534m. The interim dividend is held at 4p, but the group forecast a better performance in the second half.

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