Dowty dilutes TI earnings: Aerospace and engineering group continues to underperform

DESPITE a strong performance in US and European car markets, first- half earnings at TI Group, the specialised engineer, have fallen by 12 per cent as Dowty, the aircraft landing gear to polymer group acquired last summer for pounds 500m, continued to perform below expectations.

Pre-tax profits rose from pounds 50.2m to pounds 62.8m but earnings per share fell from 10.2p to 9p. Excluding the first- time contribution from Dowty, profits were flat.

Sir Christopher Lewinton, chairman and chief executive, said that the expected recovery in world aerospace markets had been delayed for a year and it would be better to question the value of the Dowty acquisition in two or three years' time.

Earlier predictions that Dowty would not dilute TI's earnings in 1993 have been replaced by an estimate that dilution will be a few percentage points 'either side of 5 per cent'.

Dowty's polymer and aerospace activities, although now integrated with TI, were grouped back together for the interim results.

Operating profits were pounds 17m in the first half compared with pounds 20.9m in the second half of 1992. The decline was blamed on aerospace, where spares demand has failed to recover.

TI has cut out 1,500 Dowty aerospace jobs since acquisition, equivalent to 20 per cent of the workforce. The first-half profits were reported after utilising pounds 15.6m of reorganisation provisions set up after the Dowty purchase, of which pounds 20.5m remains.

Despite the earnings setback TI increased its interim dividend by 4 per cent to 3.85p. After initial falls the shares closed 7p up at 358p as analysts were impressed by the strength of its specialised tubes business.

At constant exchange rates Bundy, which supplies piping for the automotive and refrigeration markets, increased sales by 10 per cent and operating profits by 5 per cent.

Past investment by Bundy enabled it to gain significant market share in the US, where car production rose by 8 per cent. In Europe, car output slumped by 15 per cent but Bundy is believed to have held volumes thanks to a strong position in brake tubing with Renault and Peugeot.

In engineered seals John Crane held sales at constant exchange rates by placing emphasis on products for the paper and pulp industry. Operating profits rose from pounds 22.3m to pounds 25.6m.

Profits in specialised engineering, which consists of aerospace engine rings, flexible tubing and companies earmarked for disposal, fell from pounds 2.8m to pounds 2.3m on sales of pounds 69.4m. Disposals worth pounds 100m or more are under negotiation.

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