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LUCAS INTERIM STATEMENT 1992/93; LUCAS ACCELERATES ACTION TO IMPROVE PERFORMANCE; INTERIM PROFITS AS EXPECTED

 LONDON, March 29 /PRNewswire/ -- Lucas Industries plc today reported interim profits, for the six months ended Jan. 31, 1993, slightly ahead of last year. Cost and working capital reduction programs have been accelerated as difficult market conditions continue. Lucas Industries is a leading international supplier of advanced technology systems, components and services to the world's aerospace, automotive and other selected markets.
 LUCAS INDUSTRIES plc
 Sales -- $1,918m ($1,719m)
 Operating Profit -- $37.10m ($25.5m)
 Profit Before Tax -- $7.7m ($0.3m)
 Dividend -- 3.1 cents (3.1 cents)
 Commenting on the results Sir Anthony Gill, chairman of Lucas, said: "In the first half of the Lucas year, we have made good progress in implementing planned business improvements. As predicted in October, our interim profit was a little better than breakeven -- achieved by accelerated cost and working capital reduction programs and in spite of disappointing market conditions. Progress with business restructuring, overhead reduction, productivity improvement and divestments is encouraging. With our strong market positions and product technologies, we remain confident that these actions will improve profitability from now on."
 (NOTE: British pounds converted to U.S. dollars using Jan. 31, 1993, conversion rate of $1.49.)
 Chairman's Report to Investors
 In the first half of the Lucas year, we have made good progress in implementing planned business improvements. As predicted in October, our interim profit was a little better than breakeven -- achieved by accelerated cost and working capital reduction programs and in spite of disappointing market conditions. Progress with business restructuring, overhead reduction, productivity improvement and divestments, is encouraging. With our strong market positions and product technologies, we remain confident that these actions will improve profitability from now on.
 Our cautious view on first-half trading proved to be justified. Some markets have deteriorated more sharply than anticipated -- especially in recent months -- and most European markets have been disappointing. In the U.S. and the U.K., however, hesitant recoveries now seem to be taking hold. Nonetheless, as a deeper recession in Continental Europe dampens immediate prospects for growth, we must continue to anticipate flat -- and frustrating -- general market conditions.
 Depressed economic conditions have been offset, however, by stronger sales in our automotive businesses and improved cost performance. Actions to restructure core businesses, improve productivity through employee reductions, streamline the management structure and reduce overheads continue to contribute to the improvement.
 All the restructuring projects are on -- or ahead of -- schedule, some having been accelerated in response to the disappointing market conditions. Faster implementation is likely to increase project expenditure this year to about $77 million, compared with the $54 million expected when last year's provision of $131.7 million was made.
 Employee reductions have totaled 1,600 in the first half. A further 1,200 for the second half are already announced -- in addition to divestments. At particular sites, we have increased employment -- such as at Lucas SEI in South Wales and Lucas Rists in Newcastle-under-Lyme, where 500 extra employees have been required for additional contracts with Toyota, Honda and Rover. Plans to strengthen some businesses and exploit Lucas technologies through joint ventures and partnerships are proceeding well. The petrol- injection deal with Sagem of France has been completed, as has our car brakes joint venture with Autobrzdy in the Czech Republic. Other possible alliances are under discussion.
 The divestment program of businesses not vital for, or contributing to, Lucas' core strengths has proceeded to plan. With the sale of Lucas Fluid Power Systems to Sophus Berendsen close to completion, and with the divestment of Lucas Autocentres as well as four other small overseas businesses, we are already well over halfway towards our target of achieving proceeds of $149 million.
 The sale of the aircraft windows and de-icing businesses in Luton is progressing well and other divestments are close behind, including the Aerospace switchgear, ignition and wiring businesses. Slower discussions about the Defence Fabrications business in Burnley may delay its intended sale beyond the financial year.
 The new streamlined management structure is in place, removing management layers between the group executive and the business units. John Grant, our new finance director, and Frank Turner, managing director-Aerospace, are well-established, and the whole group executive team is working well.
 We have strengthened the board, with four new non-executive directors appointed since last October. The leadership succession process is in place, with the appointment of a new chief executive to be made as soon as possible -- after which I shall become and remain non-executive chairman until a smooth handover of executive leadership has been achieved.
 The recovery in Lucas profitability is gathering pace, based predominantly on actions to reduce the cost base. This will be reinforced as a number of major investments move towards maturity. In the short-term, conditions in aerospace markets and continental Europe make our targets for the year even more challenging. Although delayed world economic recovery must inevitably dampen sales prospectus for this year, this has heightened our determination to press ahead with our vigorous program of wide-ranging cost and working capital reductions and to exploit all other profit opportunities across the company.
 The new board and the new group executive remain committed to realize fully the benefits of our investments in research, development, engineering, plant and people. Strong Lucas market positions and our world leading technologies provide a solid basis for future growth -- as world economies recover -- and for our confidence in the company's value and its potential for good profits in the future.
 Review of Results for the First Half of 1992/93
 Sales
 Group sales, including Lucas' share of associated companies, increased by almost 12 percent from $1,719 million to $1,918 million. Virtually all the increase was due to more favorable exchange translation.
 There were no acquisitions or divestments in the period.
 Automotive, at $1,180 million, represented 62 percent of the group total sales. Aerospace, at $481 million, was 25 percent, and Applied Technology, at $257 million, was 13 percent. Applied Technology figures include Lucas Electronics, formed in January 1993 from the combined Lucas aerospace and automotive electronic operations. Figures for the prior period have been restated.
 By geographic area, 35 percent of sales were made by U.K.-based operations, 36 percent by Continental European operations, 21 percent by operations in North America and 8 percent by other overseas operations.
 Operating Profit
 For ease of comparison, last year's profits have been restated to exclude the $134.1 million distribution of pension fund surplus. This occurred in the first half of last year and a $131.7 million restructuring provision was established in the second half.
 On this restated basis, operating profit increased from $25.5 million to $37.1 million.
 Reduced costs, resulting from restructuring programs and other efficiency improvements, lower reorganization and redundancy charges, reduced research and development costs and favorable exchange translation on foreign earnings, more than offset the adverse effects of continued pressure on pricing from our customers and higher depreciation charges.
 By market sector, Automotive increased operating profits from $4.0 million to $19.7 million, Aerospace was down from $15.7 million to $10.7 million, and Applied Technology was up from $5.8 million to $6.7 million.
 The geographic mix of operating profits was broadly unchanged, with $5.2 million earned in the U.K., $19.8 million in continental Europe and $16.7 million in the overseas markets. North America recorded a loss of $4.6 million.
 Interest
 Net interest costs totalled $29.4 million, up $4.2 million from last year's $25.2 million. The interest charge benefited by $6.1 million from termination of an interest swap but was higher by $5.2 million because of exchange translation.
 Profit Before Tax
 Profit before tax was $7.7 million, compared with $0.3 million last year.
 Earnings Per Share
 The tax charge of $13.2 million includes savings of $0.9 million as a result of the recently announced reduction in ACT. At the current dividend level, the tax charge would be reduced by $3.0 million this year, and in subsequent years, by $6.0 million.
 After tax and minority interests, a loss of $7.3 million was recorded for the half year. Earnings per share were 1.0 cents negative, or 0.4 cents positive on a fully diluted basis.
 Dividend
 In spite of the disappointing trading conditions already described, the company is on track with its plans to reduce costs, restore profitability and improve cash generation. Accordingly, the directors remain confident about the outlook for the company and an unchanged interim dividend of 3.1 cents per share will be paid on July 1, 1993, to shareholders registered on May 6, 1993. As before, a scrip dividend alternative will be offered.
 Aerospace
 Sales by Aerospace companies increased from $464 million to $481 million, but, at constant exchange rates, were down 8 percent, reflecting the well-publicized production cutbacks at the major airframe manufacturers and softer defense markets.
 Operating profit declined from $15.7 million to $10.7 million, although the effects of lower sales -- both in subsidiaries and related companies -- and pricing pressures were offset, to a large extent, by cost reductions from restructuring and other efficiency improvements.
 Automotive
 Sales by Automotive companies increased from $1,024 million to $1,180 million. At constant exchange rates and in spite of production cutbacks by many continental European customers, sales were up by 4 percent compared with a year earlier. This successful sales performance reflected continuing strong growth in diesel equipment sales and new contracts with Japanese plants in the U.K.
 Operating profits improved from $4.0 million to $19.7 million, with cost reductions reinforcing the favorable effect of volume growth, offset by pressure on prices.
 Applied Technology
 Sales by Applied Technology businesses increased from $231 million to $257 million, but were virtually unchanged after adjusting for exchange rates. Increased sales in the recently integrated electronics operations and in Lucas Fluid Power were offset by lower demand in Lucas Control Systems Products markets.
 Operating profits were $6.7 million, slightly better than last year's $5.8 million. The initial effects of restructuring programs started to benefit Applied Technology results in the half year, with the resulting cost savings more than offsetting the effect of a weaker mix of sales.
 Investment in the Future
 As well as the continued emphasis on cost reduction and improvement in cash generation, our commitment to the development of technologies and products for the future has been sustained. While discretionary spending has been vigorously reviewed, customer- oriented research and development and capital expenditure programs have been maintained, as have high return investments in restructuring and efficiency improvements. Of the $131.7 million restructuring provision, $23.4 million was used during the period, following expenditure of $24.1 million in the second half of last year.
 During the six month period, research and development expenditure, while down 5 percent from the previous year, was $71.1 million or 3.9 percent of sales. Capital expenditure was 5 percent lower than last year at $69.1 million, representing 3.8 percent of sales.
 The unaudited results for the six months of Jan. 31 are:
 6 Months 6 Months 6 Months Year
 to to to to
 $ Million 01/31/93 01/31/92 01/31/92 07/31/92
 Proforma
 Restated
 Sales - subsidiaries $1,809.6 $1,628.7 $1,628.7 $3,356.5
 - related 108.0 90.8 90.8 174.9
 Total 1,917.6 1,719.5 1,719.5 3,531.4
 Surplus on Trading 43.6 48.7 48.7 126.0
 Redundancy and
 reorganization costs (5.2) (22.9) (22.9) (35.3)
 Share of profits less
 losses of related
 companies (1.3) (0.3) (0.3) (3.9)
 Distribution from
 pension fund surplus -- 134.1 -- 134.1
 Provision for
 restructuring -- -- -- (131.7)
 Group operating profit 37.1 159.6 25.5 89.2
 Interest payable less
 receivable 29.4 25.2 25.2 55.7
 Profit on ordinary
 activities before tax 7.7 134.4 0.3 33.5
 Taxation 13.2 17.0 17.0 41.7
 (Loss)/Profit after tax (5.5) 117.4 (16.7) (8.2)
 Minority Interests 1.8 2.1 2.1 4.9
 Earnings attributable
 to shareholders (7.3) 115.3 (18.8) (13.1)
 Earnings per share
 - undiluted (1.0) cents 16.4 cents (2.7) cents (1.8) cents
 - diluted 0.4 cents 15.3 cents (0.9) cents 1.2 cents
 Dividends per share 3.1 cents 3.1 cents 3.1 cents 10.4 cents
 Notes:
 1. The results for each of the trading periods shown above are stated at the exchange rates ruling at Jan. 31, 1993, Jan. 31, 1992, and at July 31, 1992, respectively. If constant Jan. 31, 1993, exchange rates were applied, sales in the six months to Jan. 31, 1992, would have been $1,915.5m and for the year to July 31, 1992, $3,930.5m.
 2. First half profits in 1992 included a $134.1m distribution from the pension fund surplus. Second half profits in 1992 included a $131.7m provision for restructuring costs. To improve comparability, the proforma restated six months results to Jan. 31, 1992 exclude the $134.1m distribution from the pension fund.
 3. Research and development expenditure was $71.1m (last year $74.9m) while related royalty income was $7.6m ($7.6m). Depreciation of $71.8m ($64.5m) was charged in arriving at the surplus on trading.
 4. The net interest charge in the six months to Jan. 31, 1993 ($29.4m) includes $6.1m benefit from the termination of an interest rate swap.
 5. For the purposes of calculating diluted earnings per share, the number of shares has been adjusted for outstanding options and for shares reserved for conversion of the outstanding convertible bonds and exercise of the warrants. Earnings have been consistently adjusted for notional interest earnings.
 6. There have been no acquisitions in any of the above mentioned periods. The results shown are all for continuing operations under the definitions of FRS3, there having been no sale of cessation of business in any of the above periods which had a material effect on the nature or focus of the group's continuing operations.
 7. The directors propose the payment of a dividend of 3.1 cents (1992, 3.1 cents) per ordinary share on July 1, 1993, to shareholders registered on May 6, 1993. The cost of the interim dividend will be $22.1m ($21.9m). As in previous years a scrip dividend alternative will be offered.
 8. The ex-dividend date for the ordinary shares will be April 19, 1993.
 9. The accounts for the year to July 31, 1992 set out above are abridged; full accounts for the year, incorporating an unqualified audit report, have been filed with the Registrar of Companies.
 Group results, including the Lucas share of related companies attributable to the continuing principal classes of business were as follows:
 1993 1992 1993 1992
 Group Group
 Operating Operating
 $ Million Sales Sales Profit Profit
 Aerospace 480.7 464.1 10.7 15.7
 Automotive 1,180.2 1,024.1 19.7 4.0
 Applied Technology 256.7 231.3 6.7 5.8
 Total 1,917.6 1,719.5 37.1 25.5
 Distribution from
 pension fund surplus -- -- -- 134.1
 Total 1,917.6 1,719.5 37.1 159.6
 United Kingdom companies 675.1 659.4 5.2 4.3
 Other European companies 680.5 561.4 19.8 16.8
 North America 411.5 374.9 (4.6) (3.1)
 Other overseas companies 150.5 123.8 16.7 7.5
 Total 1,917.6 1,719.5 37.1 25.5
 Distribution from
 pension fund surplus -- -- -- 134.1
 Total as above 1,917.6 1,719.5 37.1 159.6
 The $134m distribution from the pension fund surplus arises in the United Kingdom.
 The market segment analysis given above in respect of 1992 has been restated to reflect the reorganization of the group's electronics businesses.
 The above will be included in a statement to be sent to shareholders on April 2, 1993, and will be available from Lucas Industries plc, Brueton House, New Road, Solihull, West Midlands B91 3TX.
 -0- 3/29/93
 /CONTACT: Bernard Carey, director, corporate communications, 011-44-21-627-6060, or Mark Herbert, manager, corporate communications, 011-44-21-627-6063, or Jonathan Clare, Citigate, 011-44-71-623-2737, all for Lucas Industries/


CO: Lucas Industries plc ST: IN: ARO SU:

DC-KD -- DC048 -- 0785 03/29/93 19:33 EST
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