Outlook: BTR

THE LAMENT of many a chief executive with a plunging share price and a hostile audience is that the market simply does not appreciate what he is trying to do or what he has already achieved.

With Ian Strachan at BTR, the mismatch between deeds and perception is writ large. Since he took the helm in January 1996, BTR has been transformed from a rambling conglomerate into something approaching a focussed engineering business.

Along the way businesses with sales worth more than pounds 5bn have been thrown overboard, roughly halving the size of the group, whilst pounds 1bn has been splashed out on strategic acquisitions with perhaps another pounds 2bn to come.

At the same time BTR has dispensed pounds 1.5bn to shareholders and earmarked a further pounds 500m. Nor has it bought and sold badly. Proceeds from disposals are running at 1.2 times the sales of the businesses involved, whilst the prices paid for acquisitions are comfortably below one times sales.

Operating margins are running at around 14 per cent, which though hardly scintillating, are more than respectable for the engineering sector. The balance sheet is strong and the interest cover is healthy.

All in all, not a bad corporate re-engineering job, you might suppose. Unfortunately the markets do not share that assessment. They have not been prepared to give Mr Strachan's strategy the benefit of the doubt and the result has been a share price which has underperformed the Index by 70 per cent since Mr Strachan embarked on his corporate makeover.

Four profit warnings in the last three years have scarcely helped sentiment. What is worse, BTR has had a knack of finding itself in the wrong place at the wrong time. Thus it exited aerospace just as the airlines worked themselves into an ordering frenzy, and got deeper into the automotive market just as the General Motors strike brought half the car plants in North America to a standstill.

Whereas other lame corporate ducks find circumstances against them on one or two fronts, BTR is in the firing line wherever it turns. To be fair, BTR has not been slow to warn the markets. But telling the City just how bad things are going to be in Asia does not make the pain any easier to bear.

One unforgiving analyst yesterday suggested that if BTR were a horse, it would have been taken out and shot. Mr Strachan continues to insist the nag is capable of racing. But unless that translates soon into a rebound in shareholder value, he may find his steed removed from under him.

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