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Castrol to give back pounds 280m

SHARES IN Burmah Castrol, the lubricants to chemicals group, surged 5 per cent yesterday when the group unveiled better-than-expected results and a pounds 280m return of capital to shareholders.

The group will distribute the capital - pounds 30m more than expected - in May by way of a share split yielding 131p a share. Ordinary shares will be split into new ordinary and capital shares, and the capital shares will be cancelled for cash or loan notes.

Tim Stevenson, chief executive, said: "We took the view last spring that we had an extraordinarily strong balance sheet that from the shareholders' point of view was inefficient. The figure of pounds 280m was the right figure given our ongoing acquisition plans."

Burmah, which makes and distributes fuels and specialist chemicals, was hit last year by the economic troubles of South-east Asia, the strength of sterling and cost-cutting by the international oil majors.

But the company's results revealed that it had escaped the worst of the harm. While operating profits took a pounds 25m hit from the strength of sterling, profits rose by 1 per cent at constant exchange rates. Mr Stevenson said cost-cutting in Thailand and Malaysia had made up for falls in volumes.

"This demonstrates how resilient our businesses are, given that 1998 was a particularly difficult year in Asia-Pacific. And the results were a lot more robust than a lot of people thought they would be," he said.

The shares closed up 44p at 859p as the City welcomed the return of capital. The group is seeking permission to buy back further shares in the market later this year.

Full-year profits, down by 7 per cent at pounds 245.9m, were also better than analysts expected, and the dividend will rise to 43p a share, up by 6 per cent.

Burmah Castrol, no longer classified as an oil business, has also embarked on a major restructuring programme. Instead of geographical divisions, the group has created four separate businesses for consumer, industrial, commercial and marine markets.

The group will spend pounds 110m initially to achieve savings of pounds 20m to pounds 30m a year. It also plans bolt-on acquisitions to gain market share in Europe and the US.