Lucas Industries Plc has seen some improvement in interim performance due to cost-cutting measures, attempts to reduce working capital expenditure, and better sales levels from its automotive businesses. Lower reorgansiation and redundancy charges, down from UKP15.4m in 1992 to UKP3.5m this year, and reduced research and development costs, down UKP2.6m to UKP47.7m, also helped to offset pressure on pricing and higher depreciation charges. Pre-tax profits were down 94.2% at UKP5.2m, but last year’s figures did benefit from a distribution from the UK pension fund, worth UKP90m – actual profits in 1992 were UKP200,000. Although turnover rose 11.5% to UKP1,287m, the chairman said that most of the increase was due to more favourable exchange rates. Trading conditions, he said, were disappointing. While the UK and US showed hesitant recoveries – these countries generate 35% and 21% of total revenues respectively continental Europe, which makes up 36% of overall sales, moved deeper into recession. He, therefore, continues to anticipate flat – and frustrating – general market conditions. Despite this, he is confident that the outlook for the Solihull, West Midlands-based group is good. He believes plans to reduce costs, restore profits, and improve cash generation are on target, and as a result, the board is recommending that the interim dividend be maintained at 2.1 pence. A scrip dividend alternative is also being offered, as before. The company now comprises three divisions: the first is Applied Technology, which generates 13% of group turnover. Figures from this business now include Lucas Electronics, which was set up in January 1993, and comprises the combined Lucas aerospace and automative electronic operations. While the electronics companies and Lucas Fluid Power saw sales increase, this was offset by falling demand at Lucas Control Systems Products. Although overall revenues here were up 11% to UKP172.3m, after adjustment for exchange rates, they remained virtually unchanged. Operating profits showed a UKP600,000 improvement to UKP4.5m because, the chairman said, restructuring and the resultant cost savings more than offset the effect of a weaker sales mix. The second is the automotive business, which saw operating profits increase from UKP2.7m to UKP13.2m, on turnover up 15.2% to UKP792.1m. However, at constant exchange rates, sales rose only 4%. The automotive arm makes up 62% of overall group sales. The third division is aerospace, where operating profits fell from UKP10.5m in 1992 to UKP7.2m this time. Revenues here were up 3.6% to UKP323.6m, although at constant exchange rates, sales actually fell 8% due to production cut-backs at the major airframe manufacturers and softer defence markets. This business makes up the remaining 25% of group sales. The chairman now believes the recovery in Lucas’s profitability is gathering pace, even though delayed world economic recovery must inevitably dampen sales prospects for this year.
