Diverse but dependable
Despite setbacks, BTR's ever-changing but finely tuned operation should stand it in good stead
Sunday 09 June 1996
New chief executive Ian Strachan lays the blame on BTR's Taiwanese polymers business, a star performer in 1995, and its American sealing systems division. The latter, however, can expect to pick up with the introduction of two new car models in the States: it will provide all the seals for the new Chrysler van and the Ford light pick-up truck under five and six-year contracts. And Taiwan is one of the businesses BTR will almost certainly sell as it focuses on core operations.
Nevertheless, analysts cut their estimates of full-year profits from pounds 1.45bn to between pounds 1.39bn and pounds 1.41bn, against the pounds 1.5bn it made last year on sales of pounds 9.8bn.
The share price drop, however, also marks the unease with conglomerates after the whole sector caught a cold over the last year or so. An old chestnut this, but BTR has not entirely escaped the disenchantment, whose roots lie with one-time sector king, Hanson.
Having been one of the best- performing shares in the past, Hanson has been caught up in a worrying circle of declining cashflow, with pressure to cover the dividend. The result is a demerger that few can find much to enthuse over.
Sure, there are similarities between Hanson and BTR. Both made their name in the Seventies and Eighties - BTR under the much feted chief executive, Sir Owen Green, who only retired three years ago.
But is the latest price collapse a temporary blip, or does it signal worse to come? The pundits fear BTR's glory days are over. But the consensus, nevertheless, is of a dull, utterly safe hold.
Against that is the prospect that BTR has reached a similar position to Hanson's: too big to generate the kind of deals that allow it the rates of growth it once enjoyed. If so, the company will find itself on a treadmill, always stretched to find the next deal, but unable to provide the sort of returns shareholders expect. It is too soon to see root-and-branch medicine being required at BTR. Nevertheless, that sort of unease is justified.
Direct comparisons with Hanson, however, are misleading. BTR has changed tack much in the past few years. Its emphasis on niche businesses with near monopoly status has been replaced by a desire to focus on areas where it can operate globally and be a world beater. The spadework was laid by Alan Jackson, Mr Strachan's predecessor. And Mr Strachan confirms this is the strategy he will continue to pursue.
In its last report and accounts, BTR boasted 22 divisions in all, with names from Formica to Hawker Siddeley. Packaging, the largest, had sales of almost pounds 1bn, with products ranging from glass bottles to plastic cartons for milk and fizzy drinks.
BTR has always been hard to keep abreast of, given the staggering range of businesses in which it operates, and the bewildering pace with which it continues to shuffle its deck. Its biggest move last year was the pounds 2bn buyout of the 38 per cent minority stake in Australian quoted BTR Nylex, in the hope of gaining a solid platform to spearhead its thrust into Asia. But it also sold its Dunlop Slazenger business, as well as 19 other businesses which did not fit - while buying eleven more, Nylex excluded.
However, there seems to be a method to the latest strategy, with its shift away from consumer items to serving a broad range of industry. Given its size, in many ways, BTR can only hope to be a proxy for the economies in which its has a presence. With OECD economies set to expand at 2 to 3 per cent a year, and given that 90 per cent of sales are in these areas, the problem becomes clearer. However, it is making strenuous efforts to develop a presence in the emerging, fast-growing economies of Asia and South America. Sales in the latter have grown fourfold since 1991, and will double this year, with the additions of automotive suppliers Metalurgica Carbo and OSA. Construction, commercial interiors and aggregates are all for sale.
Overall, there is much going for BTR. Its moves into Asia and Latin America show that nimbleness and risk-taking have not yet deserted the board. The fall in the shares is overdone: long-term growth is still attainable, even if not at the heady rates of yesteryear.
With a positive dividend outlook, the shares are a buy, for the long- term - if only for the yield.
Share price 269p
Prospective p/e 11.9
Gross dividend yield 6.7%
Year to 31 December 1994 1995 1996* 1997*
Turnover (bn) pounds 9.44 pounds 9.78 na na
Pre-tax profits (bn) pounds 1.078 pounds 1.503 pounds 1.430 pounds 1.550
Earnings per share 24.5p 26p 24.3p 24.9p
Dividend per share 13.5p 14.7p 15.1p 16p
*Panmure Gordon forecasts
- 1 Michelle Rodriguez: Fast & Furious actor apologises after telling 'minorities' to stop taking on 'white' roles
- 2 Raif Badawi, the Saudi Arabian blogger sentenced to 1,000 lashes, may now face the death penalty
- 3 PornHub turns masturbation into energy in bid to save the planet
- 4 Robert Mugabe eats a zoo for 'obscene' 91st birthday party
- 5 The remarkable archaeological underwater discovery that could open up a new chapter in the study of European and British prehistory
Michelle Rodriguez: Fast & Furious actor apologises after telling 'minorities' to stop taking on 'white' roles
Boris Nemtsov shot dead: Putin critic may have been murdered by Islamic extremists, says president-led committee
British are sexually uptight, dirty and drink too much – according to Spanish book
Raif Badawi, the Saudi Arabian blogger sentenced to 1,000 lashes, may now face the death penalty
PornHub turns masturbation into energy in bid to save the planet
New theory could prove how life began and disprove God
This is what it's like to be dead, according to a guy who died for a bit
'Cash for access' scandal: Sir Malcolm Rifkind says 'unrealistic' for MPs to live on £67,000 salary
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Ukip would cut billions from Scottish budget to fund English tax cuts
Russia's roadmap for annexing eastern Ukraine 'leaked from Vladimir Putin's office'
iJobs Money & Business
£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...
£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...
£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...
£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...