TI takes pounds 87m aside for Dowty

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The Independent Online
THE ENGINEERING group TI has made total provisions of pounds 87m for Dowty, the aerospace products company it acquired in a pounds 520m hostile takeover in June.

The provisions, to be included in this year's results, are significantly below the market's estimates of about pounds 100m. They relate to the reorganisation of Dowty and write-down of asset values.

The provisions, to taken through TI's balance sheet, are almost one and half times Dowty's taxable profits of pounds 61m last year and three times its profits forecast made during the takeover bid.

Yesterday's move was accompanied by the announcement of 175 job losses at Dowty's engineering plant in Wolverhampton. About 100 jobs have already gone at its head office, which has been closed.

Almost pounds 50m of the provisions are for that closure and the integration of Dowty's aerospace and polymers businesses.

Another pounds 16.7m is being set aside to cover loss-making contracts, pounds 12m for current assets and pounds 4.7m for legal and environmental costs.

TI said that its review of Dowty's operations had gone according to expectations.

'The review has validated TI's original assessment of the strategic value of Dowty and has confirmed that its core businesses can be developed into a third world-leader business for TI,' it said.

But the group again said that the acquisition of Dowty would not dilute next year's earnings. The group also predicts that it will become debt-free by 31 December 1993: it envisages having outstanding borrowings of pounds 100m at the end of this year.

Despite the assurances, City analysts are taking a cautious line. Sandy Morris, of County NatWest, is forecasting earnings per share of 20.9 for 1993, against 22.4p in 1991 and 19.6p expected for this year.

TI shares rose 12p to 282p yesterday, although they shed 20p on Wednesday after a profits downgrading by the broker Kleinwort Benson.