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LUCAS INDUSTRIES: OPERATING PROFIT HALVED, DIVIDEND MAINTAINED; RESTRUCTURING PROVISION OFFSETS PENSION & SURPLUS DISTRIBUTIONS

LUCAS INDUSTRIES: OPERATING PROFIT HALVED, DIVIDEND MAINTAINED;
 RESTRUCTURING PROVISION OFFSETS PENSION & SURPLUS DISTRIBUTIONS
 WASHINGTON, Oct. 14 /PRNewswire/ -- Lucas Industries plc, the leading international supplier of advanced technology systems, components and services to the world's aerospace, automotive and other selected markets, reported on Monday, Oct. 12, results for the 1991/92 financial year, together with new plans for restructuring core businesses, a divestment program for non-core businesses and further actions to reduce costs, generate cash and enhance shareholder value.
 Continued difficult market conditions halved operating profit, but investments were maintained to sustain the company's market and technology leadership. The contribution received from the pension fund surplus was offset by a provision for the costs of restructuring core businesses. The dividend was maintained.
 LUCAS INDUSTRIES
 1991/92 1990/91
 Sales $4,551m $4,777m
 Operating Profit $111.9m $217.9m
 Pension Fund Surplus Distribution $172.8m Nil
 Provision for Restructuring $169.7m Nil
 Pre-Tax Profit $ 43.2m $159.0m
 Dividend 13.4 cents 13.4 cents
 (July 31, 1992, conversion rate of $1.92)
 Commenting on the results, Sir Anthony Gill, chairman of Lucas, said:
 "Trading conditions were difficult last year and there are no signs yet of any general improvement. Indeed, some markets -- such as the U.K, Germany and Italy -- seem to be deteriorating further. Under these circumstances, we must expect our first half to be little better than last year's.
 "Political and economic turmoil and uncertainty have extended the recession and affected significantly Lucas markets. Responding to these pressures, Lucas -- with a streamlined management structure -- is implementing new plans to further reduce operating costs, increase competitiveness, sharpen focus on world leading core businesses, increase cash generation, improve profitability and enhance value for shareholders.
 "Lucas is financially sound, with gearing set to reduce, and has reinforced a position from which it can generate future profitable growth. This year we are aiming to restore earnings to cover a maintained dividend and are committed to a dividend policy which rewards our owners for their long-term interest and investment in Lucas."
 Sales
 Sales, including Lucas' share of associated companies, were $4,551 million, a reduction of $227 million, or 5 percent, from 1991. Automotive sales were up but aerospace sales declined, partly due to exchange rates. Overall, exchange rate changes -- mainly a weaker U.S. dollar -- reduced sales by $119 million, while acquisitions in America at the end of 1991 added $88 million in their first full year. Lower demand levels and competitive pricing in Lucas' markets accounted for the balancing $196 million.
 Exports, including estimated indirect exports, totaled $1,142.4 million. The proportion of total sales going to non-U.K. customers rose to 81 percent from 78 percent in 1991.
 Profit
 Operating profit for the year was almost halved at $111.9 million. Changes in exchange rates had very little net impact. Research and development programs continued at a cost of $188.7 million, down from last year's $199.9 million, to sustain the company's leading technology position in its key markets. Reorganization and redundancy costs were similar to the previous year at $45.5 million. Of the profit reduction, $45.9 million was in the United Kingdom and $43.4 million in North America. Operating profits in Europe were $10.2 million lower and businesses elsewhere were $6.5 million lower.
 The $173 million distribution to the company from the UK pension fund surplus has been included in the profit and loss account as an exceptional item. The board has decided to make a special provision of $169.7 million, also treated as an exceptional item, for the restructuring of several core businesses. The provision covers the costs of integrating operations into fewer, more modern facilities, in some cases across international boundaries, to reduce costs and match fully the future needs of our customers. Several of these actions have been implemented and the provision includes $31.1 million incurred in the second half of last year. Consequent redundancies so far total 1,250 with a further 2,750 to come, in addition to those to be achieved through continuing cost reduction actions throughout the company.
 Net interest costs totalled $71.8 million, $12.9 million higher than the previous year, reflecting higher average borrowings. Profit before tax was $43.2 million, compared with $159.0 million in 1991.
 The tax charge of $53.8 million includes the heavy burden of unrelieved Advance Corporation Tax on dividends and does not anticipate recovery of this in the near future. After minority interests, an after-tax loss of $16.9 million was recorded for the year. Earnings per share, on a fully diluted basis, were 1.5 cents.
 Dividend
 The difficult trading conditions experienced in the year have continued into the first half of the current year. However, actions by Lucas to restore profitability and generate cash are positioning the company for strong and profitable future growth. Accordingly, the directors are proposing that the dividend should remain unchanged at a total of 13.4 cents per share for the year.
 Balance Sheet
 Capital expenditure and working capital have been reduced while maintaining the company's commitment to new product programs and developing technologies. Capital expenditure declined to $236 million from $265 million last year. Tighter control of stocks and debtors contributed to a net decrease of $86 million in non-cash working capital.
 The company's net borrowing position at July 31 was $631 million, $3 million higher than a year earlier -- but capital employed has reduced, resulting in a gearing ratio of 44 percent, compared with 40 percent last year. Maturities of borrowings have been lengthened significantly during the year, providing greater financial flexibility in implementing the company's future plans.
 Aerospace
 Sales by Aerospace companies declined from $1,442 million in 1991 to $1,233 million. Changes in exchange rates were responsible for $53 million of the shortfall. Lucas Aviation, acquired in July 1991, had sales of $38 million. The decline in market demand and competitive pressure on selling prices accounted for most of the balance of $194 million. UK sales declined $117 million, while sales in North America excluding the acquisitions were $35 million lower.
 Operating profits fell to $36.7 million from $125.4 million. Defense cuts and weak demand in the civil sector, together with provisions for stock write-down and potential warranty claims, were the major factors. Performance weakened in all major markets. Reduced profits of $59.3 million were earned in the UK, while losses were incurred in North America ($19.8 million) and continental Europe ($5.4 million). Other markets contributed profits of $2.5 million.
 Automotive
 Sales by automotive companies were marginally higher at $2,837 million. The adverse effects of exchange rates ($23 million) and weak vehicle markets were more than offset by business gains and other improvements. The main feature was a strong performance in continental Europe where sales were up by $161 million at $1,271 million.
 Operating profits, at $74.1 million, were $1.5 million lower than 1991, with cost effciencies being offset by competitive pricing pressures. Increased profits of $88.7 million in continental Europe and reduced profits of $20 million in the Rest-of-World markets were partially offset by losses of $28.2 million in the United Kingdom and $6.3 million in North America.
 Applied Technology
 Sales for the year were $480 million compared with $508 million in 1991. The acquisition of the Allen Group in June 1991 -- now integrated and renamed Lucas Assembly & Test Systems -- contributed $50 million, more than offsetting the adverse exchange impact of $42 million. Weak market demand and competitive pricing accounted for $36 million of the shortfall.
 An operating profit of $1.1 million compared with $16.9 million the previous year. The acquisition made a positive contribution in its first full year. Competitive pressure on margins, soft market conditions, and increased research and development spending were only partially offset by fixed cost reductions.
 1992 Annual Report and AGM
 The Lucas Annual Report and Accounts for 1992 will be sent to shareholders on Oct. 26 and the Annual General Meeting will be held at the Birmingham Metropole Hotel on Nov. 18, 1992.
 The final dividend of 1991/92 will be paid on Jan. 18, 1993, to shareholders on the register at the close of business on Oct. 29, 1992. As before, a scrip dividend alternative will be proposed at the Annual General Meeting. Shareholders are asked to note the benefit to the company in electing to take the scrip alternative as this reduces Advance Corporation Tax.
 -0- 10/14/92
 /NOTE: For a complete report, contact Renate Myles at the number below./
 /CONTACT: Renate Myles of Lucas Aerospace, 703-264-2387; John Grant, finance director, or Bernard Carey, manager, corporate communications, Lucas Industries plc, 071-493-6793/ CO: Lucas Industries plc ST: District of Columbia IN: ARO SU: ERN


DC -- DC027 -- 0067 10/14/92 16:39 EDT
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