Hopes grow that 'Simpson effect' will linger at Lucas
INVESTMENT COLUMN
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.Lucas Industries' shareholders would be forgiven for feeling slightlyshort- changed. Yesterday's results revealed the improvements being made at the car parts and aerospace group - although there is also still lots to do.
But now the architect of recent changes, George Simpson, is leaving with the job half-finished. A cloud has hung over Lucas's shares for months as rumours of Mr Simpson's move to GEC gathered steam, and the uncertainty will continue until a replacement is found.
But the reasons for the 38 per cent jump in interim profits, and evidence that recession in the aerospace industry is over, give hope that the improvements will continue beyond Mr Simpson's departure.
Lucas's trading in the first six months was not without problems, however. Group profits of pounds 61.6m, against pounds 44.5m, were struck despite a downturn in the key automotive markets, particularly France where output by car makers fell 11 per cent.
Even so, the automotive division, accounting for 80 per cent of sales, saw turnover rise from pounds 1bn to pounds 1.2bn, with profits up pounds 8.3m to pounds 65.3m, helped by an increased contribution from Lake Center Industries, the US operation bought at the end of 1994.
Of the four automotive operations, only the diesel business suffered a fall in sales, thanks in large part to sharply reduced demand in the US heavy truck market. But with European and US vehicle sales showing modest growth in the first two months of 1996, any further fall in truck sales should be offset.
Although Lucas showed signs of getting to grips with the aerospace business, divisional profits up from pounds 9m to only pounds 13m were disappointing. But as airlines return to profitability and place more orders with airframe makers, the future looks more rosy. Certainly the aerospace division will counter any further slowdown in automotive growth.
Profit forecasts for the full year are being held at around pounds 180m, with 12.3p of earnings and a 7p dividend. With the shares up 7p to 199p, Lucas trades on a price/earnings ratio of 16 - an expensive 13 per cent premium to the rest of the market. While yesterday's figures were the first good set of Lucas results for a long time, that is high enough until a successor is found.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments