The Investment Column: Morgan Crucible

SOME MAY say Morgan Crucible's restructuring came too late. Few would say it is too little. The engineer, which makes hip-joints and powerdrill motors, shed 815 jobs in the first half of the year and has cut the number of operations from 180 to 50. Chief executive Ian Norris warned yesterday that the continued restructuring, aimed at achieving a modest pounds 20m annual cost saving, would cause disruptions in the second half, and the market knocked its shares down 9 per cent to 281p. If the attempted transformation is taking longer than expected, how much patience will investors need?

Mr Norris says most of his markets - the US steel industry and European rail industry being the exceptions - are showing signs of an upturn. Sales from the Asian operations are booming, US consumer demand is strong and the petrochemicals industry is recovering. Unfortunately that hasn't fed into the half-year figures, where underlying carbon operating profits fell 16 per cent and ceramic profits fell 27 per cent, both on broadly flat sales. Meanwhile, Mr Norris claims the benefits of the reduction in headcount won't impact until this half.

The strategy is to exit low-margin businesses to focus on the supposedly niche, technologically superior products. Disposals proceeds of pounds 33m counterbalanced the slump in first-half operating profits; further disposals should net pounds 50m. Analysts' forecasts of pounds 70m pre-tax profits and 19p earnings per share should be taken with a pinch of salt given the restructuring. The outlook for the shares is unpredictable, but there's no reason to bail out.