BTR still stuck in wrong markets

What does BTR stand for? Best To Retain, one broker reckons; Best Total Return is the company's rather eccentric gloss on the company's steady under-performance of the market over the past three years; Boring, Tried and tested, Reliable is probably closest to the mark.

That is not necessarily a bad thing in a company and no one will complain about a 10-year record that has seen turnover rise from pounds 4bn in 1985 to pounds 9bn last year, profits increase from pounds 383m to pounds 1.5bn, earnings per share from 10.1p to 24.9p and the dividend from 3.5p to 14.7p. But it is hard to see what the company can do to create more investment excitement.

BTR's problem is that it already generates impressive margins from its substantial sales base, 17 per cent from continuing operations last year. It already has a broad geographical spread and increasingly it has a sensible focus on five product areas - industrial, transport, construction, electrical systems and consumer products. Alan Jackson created a finely tuned, well oiled behemoth in his years at the helm; what can Ian Strachan do to better it?

Not surprisingly he has a plan, and an eminently well intentioned one at that. In its simplest form it includes focusing on the world's emerging markets, increasing the global spread of its major industrial sectors and growing sales. It is hardly going to take your breath away.

But, to be fair, what can you do with an industrial giant such as BTR which in its present form can only ever hope to be a proxy for the economies in which it operates? With the OECD countries expected to grow at between 2 and 3 per cent a year for the next 15 years, compared with the emerging world's growth of between 7 and 10 per cent, it is not even in the right markets yet.

It is, however, doing the right things. Buying out the Nylex minority was a necessary first step in its planned assault on the high growth markets of the Far East, eliminating potential conflicts of interest. And the deck-clearing of the last year or so, selling Dunlop Slazenger for example, means the company is at least paying lip service to the City's latest buzz-word, focus.

But strip away the new boss's enthusiasm and what do you have left? A slow-growth industrial manufacturer, operating in mature markets with an attractive yield to compensate for the tedium.

On the basis of forecast profits this year of pounds 1.5bn and earnings per share of 24.5p, the shares, up 12.5p to 334.5p, stand on a prospective price/ earnings multiple of 14, in line with the market. A yield of 5.5 per cent is some compensation but that sort of return is available with no risk to your capital. A dull hold.