George Simpson, the new chief executive at Lucas Industries Plc, the automotive and aerospace group, used the company’s full year results report to announce further disposals and restructuring. Lucas Communications & Electronics and Lucas Aviation are now set to follow Lucas Management Systems Ltd, nee Metier, purveyor of the Artemis management system and Lucas Engineering & Systems Ltd (CI No 2,515) to market. Both companies are based in the US; Lucas Communications & Electronics makes electronics systems and components and includes the Lucas Aul unit in New York, investigated by the US authorities for falsifying missile launch unit test results and earning Lucas a $12m fine in May this year. Total exceptional costs of UKP213.9m wiped out the company’s UKP84.2m pre-tax profits and left it UKP129.7m in the red on turnover up 2.0% at UKP2,488m. The exceptional items include a provision of UKP87.6m for restructuring three core divisions: diesel and flight control systems and electronics, and an unspecified sum to cover legal costs from settling claims related to a US government investigation into the supply by Lucas of faulty F/A18 jet gearboxes; UKP94.3m was also written off as goodwill against profits on businesses planned for disposal. A further UKP18.4m loss was incurred from the sale or closure of businesses some of which were loss-making. Lucas also made a small gain of UKP8.8m on the disposal of fixed assets, mainly sale and leaseback of several US facilities in December 1993. However all was not gloom as operating profit rose 48.2% to UKP126.6m, before UKP110m of exceptional costs were taken at the operating level. Net borrowing has also been reduced to UKP251m and gearing to 39% from 47.3%. Operating profit at the automotive division was up 98.0% at UKP88.1m, aerospace fell 56.4% to UKP13.2m after the stock revaluation, before exceptionals up 132.6% at UKP30.7m. Applied technology fell 71.8% to UKP3.0m, after an exceptional charge of UKP3.5m for reorganisation. The company has found better economic conditions, particularly in its automotive business, in the US and UK while Japan and Europe stayed weak. The exceptional items will have only a small effect on cash flow, with only the costs of restructuring and legal claims still to be paid. Lucas anticipates that the proceeds of divestments, supplemented by cost savings from the restructuring actions, will cover the cash requirement. The markets liked the news, adding 10p to 187 pence. The dividend is maintained at 7 pence.
