The Investment Column: TT Group

TT GROUP's results read like a grim documentary about the decline of British manufacturing industry. The engineer, which makes self-adjusting headlights, is selling fewer products at lower prices. Rover, a principal customer, slashed orders in the first half of the year.

European and North American sales of the cars TT equips declined. Even sales to the growth markets of telecoms and computers reversed. Meanwhile, TT is struggling to compete with European rivals because of the strength of sterling.

TT is taking action, however. The workforce has been cut by 9 per cent. A further cost-cutting operation is targeted at achieving savings of pounds 5m next year. It has a strategy to dispose of the businesses, which are a lag on earnings to concentrate on the niche manufacturer of components for other engineering suppliers, particularly in the automotive sector.

The problem is that most such opportunities have long since disappeared. The idea of offering one-stop solutions is hardly innovative in engineering nowadays. TT admits the transformation process is behind schedule. The outlook contains little to excite investors. August was a bad month, TT says.

Analysts expect pre-tax profits of pounds 39.5m and earnings of 16.8p. The best hope for shareholders would be a bid, but TT is not looking attractive. By holding the dividend, the management appears to have ruled out a buyout too. It's too late for holders of the shares - which have fallen from a high of 392p - to sell now but other investors should steer clear.