Investment: BBA kept aloft by aviation

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THE ENGINEERING sector is out of favour and BBA has suffered with it. Judging by yesterday's interims this is not entirely unjustified. Although the shifting balance of the business makes fair comparisons difficult, the 7 per cent rise in pre-tax profits to pounds 83.7m owed much to a sharp drop in interest charges.

The best performance came from the aviation arm, benefiting from the growing use of corporate aircraft for timeshare travel. The unit generated one- third of first-half profits and is showing organic growth in sales and profits. The order book remains strong, while bolt-on acquisitions fit easily into the existing framework.

Sales in the non-woven division which supplies the essential materials for nappies and sanitary towels were static, but increased capacity and new projects will come on stream in the second half. Veratec, the pounds 160m acquisition, will also start contributing to profits, while BBA is set to expand into China and Latin America, both growth markets.

Sales of brake pads grew by just 1 per cent in the first half, excluding the impact of exchange rates, and what growth there was came from the replacement market. Much depends on new development programmes in the US.

The shares closed little changed at 350p, well below the peak of 533p three months ago. Analysts are disinclined to change their forecasts for the full year, which average pounds 166m, rising to pounds 190m for 1999. On a forward multiple of 12 the shares are worth watching, but until market sentiment shifts back to engineers they are fully valued for now.