Lucas to sell two aerospace wings

Click to follow
The Independent Online
LUCAS Industries is planning the sale of two of its aerospace subsidiaries. The disposals are part of a massive restructuring exercise - several thousand jobs are likely to go - which will be announced today when the group reveals its 1994 results, writes James Bethell.

George Simpson, Lucas's chief executive, wants to refocus the troubled group on its profitable automotive divisions and to dispose of other businesses acquired in a coroporate spending spree during the 1980s.

But the exercise is likely to involve provisions and write-offs of more than pounds 100m, twice the level expected by the City, which will wipe out last year's profits.

As well as the costs of the restructuring, and provisions for fines relating to disputes in the US with the Pentagon over two aerospace contracts, the company faces large goodwill write-offs in respect of the subsidiaries to be sold.

Since joining the company in April 1994, Mr Simpson has struggled to cut costs, improve management, settle the long-standing legal dispute with the Pentagon and stave off potential hostile bidders.

His efforts are beginning to reap rewards. Pre-exceptional profits for the year to 31 July of between pounds 60m and pounds 80m should comfortably beat last year's figure of pounds 50m. Margins have also improved by up to 50 per cent thanks to booming Continental car sales.

But rumours of big write-offs and a possible rights issue have given the City the jitters about Lucas shares. At one point on Friday, they fell 11p to 171p and closed at 177p.

'The City got in a bit of a panic,' said Robert Speed at the broker Henderson Crosthwaite.

The size of the write-offs will surprise many City analysts, who thought Mr Simpson would concentrate on tackling Lucas's bloated cost base.

Comments