Time for BTR to cut the payout

The Investment Column

BTR's traditional lunchtime briefing of analysts in the Savoy yesterday was a tenser affair than usual. The conglomerate was keen to reassure the collected brokers whose recommendations to clients over the past year or so have left them with considerable amounts of egg on face.

Since the shares peaked in the summer of 1993 at just over 400p, they have fallen by a half relative to the market. At 255p they stand more than a fifth lower than they did at the beginning of the year. Like Hanson before it, BTR has fallen out of favour with a painful bump.

Conversation focused on two main areas. First the dividend, which for the first time in thirty years has started to look in danger of being cut. No comment on that subject was the rather unsatisfactory result, suggesting that house broker BZW's forecast of a same again payout of 14.7p, excluding any foreign income payment, was probably fairly well informed.

At that level, the shares yield over 7 per cent, right up there with the FT-SE 100's other disaster stories, Hanson, British Gas and P&O. That's a harsh measure of a company that for years has produced impressive growth in the payout, but not unreasonable given the remaining uncertainty that Ian Strachan will take the bull by the horns in September and actually trim a payout that in truth the company cannot really afford.

With dividend cover of less than 1.5, BTR is plainly paying too much of its hard pressed cashflow back to shareholders at a time when capital expenditure demands, the second big topic of conversation at lunch, are on the increase.

With interests in so many fast-changing industrial fields around the world, BTR is having to spend very fast just to stand still in demanding markets such as automotive components where lack of investment is a sure fire recipe for failure.

BTR's other cashflow problem stems from the unexpected collapse in the share price which has put pounds 220m of warrants out of the money. The company would not admit as much but it was undoubtedly counting on the conversion of three tranches of warrants over the next three years, effectively a rolling rights issue, to fund its capital and dividend paying commitments.If the warrants are not converted the pressure can only increase on a disposal programme already running at a good lick.

BTR's biggest hope is to get itself reclassified as an engineering company so it can start to benefit from the premiums to the market rating enjoyed by companies such as Siebe, Smiths Industries and TI. Until it does, BTR is likely to continue trading at a discount. As Hanson has shown, demerger is not necessarily a panacea for shareholders and the outlook remains uninspiring.

Start your day with The Independent, sign up for daily news emails
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

Ashdown Group: Marketing Executive - 6 month FTC - Central London

£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...

Ashdown Group: Junior Project Manager (website, web application) - Agile

£215 per day: Ashdown Group: Junior Project Manager (website, web application ...

Guru Careers: Software Engineer / Software Developer

£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'