Conglomerates under spotlight as BTR reveals its disposals plans

Click to follow
It's the tale of two contrasting conglomerates this week. In a veritable deluge of results - more than 100 companies have so far signalled their intention to report - the most eagerly examined will be half-year figures from BTR with those from Williams Holdings not so far behind.

Once congloms were the darlings of the City. Using highly rated shares seemed a cheap way to buy a company. At their height, the likes of Hanson and BTR swept ahead, spawning a succession of imitators.

The sun is already setting on the empire created by Lord Hanson. The sprawling group is in the process of being broken up and last month's results, the last before the demise, were delivered with little more than a whimper.

It was a sad end for what was once the City's most feared predator. The days when its figures would be scanned to try to spot its next takeover victim were but a distant memory.

This week's BTR interims will be closely perused; more to discover what is likely to be sold rather than to gather clues where new chief executive Ian Strachan might strike.

Profits will be down - two warnings have been delivered to make sure investors got the message - and the dividend cut. There could, some whisper, even be boardroom changes with long-established directors under pressure.

Last week, the new BTR stance was underlined with the pounds 212m sale of its US aggregates business.

It's a far cry from the halcyon days when BTR (the Birmingham Tyre & Rubber Co) was as bouncy and buccaneering as Hanson, with the City debating the extent of profit and dividend increases and speculating on its predatory direction.

Three years ago, BTR shares hit 403p. It has been sadly downhill most of the time since, with Friday's 262p offering little comfort to the beleaguered management.

The 1995/96 warrants, with a 258p striking price, bump along at 7p. They can be exercised following the results. Unless Mr Strachan offers unexpected comfort, managing to demonstrate the worst is over and BTR is heading for much happier days, the hard-pressed group can kiss good-bye to the pounds 240m outstanding from the warrants.

Profits are likely to emerge 5 per cent lower at pounds 630m and the dividend cut by a third, even halved.

The hope is Mr Strachan will produce details of disposals and a radical consolidation of a group which once enjoyed a prodigious appetite for expansion.

As BTR lost its way, Williams Holdings, once a smaller image, has managed to dodge the pitfalls which damaged its bigger rivals.

Its failure to clinch three contested takeover bids could have been blessings in disguise. The group is now more focused, with three core areas.

Interim figures are likely to be around pounds 112m, up from pounds 103.1m and the dividend lifted from 5.5p to 5.75p. The shares are at a 12-month high. Their performance has, however, not been impressive.

Colin Porter at stockbroker Albert E Sharp is a Williams fan. He says: "For too long, the shares have poorly rewarded their supporters but now look poised to break out from the sector strait-jacket and achieve genuine growth status as the management team confirms its ability for innovative strategic thinking."

Charter, once South African-controlled, makes it a conglom hat-trick. It is expected to manage a modest profit increase, say 7 per cent to pounds 54m at the half-way stage.

But Bruce MacDonald and David Allchurch at NatWest Securities are not strong supporters. They believe the shares, near their year's low at 863p, are a sell.

"An acquisition is needed more than ever to offset the cyclicality of the existing businesses. Until Charter announces its next acquisition, the balance between risk/reward remains unattractive," they say.

Last week was an uneventful one for shares and this week is unlikely to spark much action. Tim Brown and Scott Evans at UBS are holding their year-end Footsie forecast at 3,800 points and see more enticing prospects overseas; Sweden, Spain, Italy and Japan get their vote.

The profits rush should, if anything, help market sentiment. Kingfisher's interim results are likely to demonstrate convincingly that it is continuing to recover from the bruising experience which led to the departure of four directors. Tony Cooper at stockbroker Greig Middleton forecasts pounds 99m, up from pounds 76.5m. For the year he is shooting for a record pounds 339m.

The improvement in the do-it-yourself market and hopes of better results from France are behind the Cooper forecasts.

Much further down the recovery road is United Biscuits. It should, however, manage half-time figures of pounds 45m against pounds 13.6m although the dividend is likely to be pegged.

UB is, in a sense, a Zeneca of the market. These days the drugs group attracts takeover speculation with almost indecent frequency. Once UB endured the same fate. But as profits suffered and the shares crumbled, UB has been allowed to jog along without the distraction of possible takeover marauders.

Other interim figures due include British Aerospace, which should produce an uplift from pounds 160m to pounds 220m; building materials group Caradon is likely to be down from pounds 90.2m to pounds 69m and textile group Coats Viyella from pounds 68.7m to pounds 44m.

British Gas, as a side-show to its protracted confrontation with its regulator, could manage a slightly deeper second-quarter loss of pounds 47m. But in the roar of battle the figures are irrelevant. Still, Gas does have to make a dividend decision with many regulatory questions unanswered. It will probably settle for an unchanged interim of 6.4p and tinker with the final, if necessary.

Two newspaper groups are in the interim reporting army; NatWest is looking for Mirror Group to make pounds 43.6m (pounds 39m) and United News & Media pounds 133.5m (pounds 124.9m).