First-Half Profit Growth Falters At Lucasvarity

Tough times in the European car market and summer shutdowns by US manufacturers stalled profit growth at LucasVarity, the Anglo-American engineering group, during the first half. Pre-tax profits were £167 million during the six months to July 31, down 1.2 per cent on the pro-forma figure achieved by Lucas and Varity last year before their merger. The figure included £19 million of proceeds from asset sales. Half-year sales climbed 2.2 per cent from £2.3 billion to £2.35 billion. But that included a £78 m illionbenefit from acquisitions: the underlying movement was downward. Victor Rice, chief executive, said sales would have been £132 million higher, however, had theirvalue not been reduced on translation by the strength of sterling. Between the first and second quarters, turnover fell in the braking systems and other automotive division. But increased sales were achieved from the manufacture of Perkins diesel engines, and from the old Lucas aerospace business, which makes actuators and engine controls.

 

Operating profits from brakes declined by £3m to £33m. However, profits from the other three divisions all achieved modest increases. Profit margins in each of the businesses increased, however, to an average of 7.9 per cent during the second quarter, from 7.1 per cent during the first. Rice said the business was reaping the first benefits of the rationalisation programme announced last year. Some 2,000 jobs have been cut from the 55,000 inherited at the time of the merger, and another 1,500 cuts have been announced, though not yet completed. LucasVarity was on course to achieve the £120 million savings promised by the end of 1998, Rice said. Earnings per share were 8p. The interim dividend is 2.25p. Rice said the company had bought in 33m of the 43m shares it plans to repurchase this year, at a cost of 59 million. The shares eased 21/2p to 209p.