BTR PLC - Trading Statement

RNS No 3113c
BTR PLC
5th December 1997

DECEMBER REVIEW

Since our interim results in September, we have experienced a number of
important changes in our trading environment.  The economic downturns in Asia
and South America, and the continued strength of sterling have affected our
overall performance.  Consequently, we expect our continuing profit in the
second half (excluding acquisitions), to be more or less in line with the
restated first half results.

In September, BTR announced first half continuing profit (excluding
acquisitions) of #601 million.   As a result of the disposal programme,  the
restated first half operating profit for the continuing businesses would be
approximately #565 million.

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Impact of disposals and acquisitions

The disposal of polymeric products businesses for #515 million was
successfully achieved ahead of schedule.  This disposal represents over 15% of
the revenues identified for disposal in September 1997.   On the basis of
disposals to date, we expect contribution to profit before tax from
discontinued businesses will be around #25 million in the second half 
(approximately #40 million first half). 

Acquisitions to date in 1997, are currently expected to contribute around #25
million profits for the full year.

Strength of sterling

Sterling has continued to strengthen against other currencies thereby further
affecting the translation of profits.  In the first half of 1997, currency
movements had an adverse translation impact against the same period in 1996 of
#43 million in terms of operating profit.  At that time, we estimated that the
full year translation impact would be around #63 million.  However, as the
average 1997 sterling exchange rate has continued to strengthen, we now expect
the full year translation impact will be some #75 million.   This assumes
currency rates remain at their current level for the balance of the year. 

In addition, there is a transaction impact (through import substitution and
competition in export markets) on certain UK businesses.  The continued
strength of sterling will have a further transaction impact on the second half
results which is expected to be higher than the first half.  

Asia and South America

The extent of the second half improvement has been and will continue to be
affected by weakening economic conditions in certain geographic regions such
as South America and East and South East Asia.  Based on 1996, BTR has
approximately #900 million sales in emerging markets such as China, Brazil,
South East Asia, Korea and Malaysia. 

Outlook

Commenting on the December review, Ian Strachan, Chief Executive of BTR, said:


BTRs performance in the second half of 1997 has been adversely impacted by the
recent economic downturn in Asia and South America and the continued strength
of sterling.  This is expected to carry over into 1998.

We have made a good start towards our objective of turning BTR into a focused
engineering group.  Divestment of non-engineering activities is proceeding in
line with expectations, and attractive acquisitions, like Exide, have been
made to augment our engineering businesses.  Investment in the engineering
core will be stepped up as cash is realised from disposals, and a significant
proportion of the proceeds will be returned to shareholders.

ENGINEERING GROUP

Automotive

Strong performances from the Sealing and Anti-Vibration businesses have been
maintained into the second half; both businesses are now benefiting from the
effects of the reorganisation of the Automotive operations in Germany, and new
Sealing Systems platforms such as the Ford Expedition and the Volkswagen
Passat  have generated strong sales.  The recent award to Sealing Systems of
the Audi B6 platform will generate annual sales of in excess of US$30 million,
with production starting in 2000.  In the Anti-Vibration group, the level of
quotation and design requests received remains high.

In September, it was announced that Automotive in South America had a
difficult first half.  The anticipated recovery materialised in the third
quarter, however the recent doubling of interest rates, along with the credit
squeeze, have significantly affected automotive sales and OEM build rates in
Brazil, a situation which is expected to continue into 1998.  In addition, the
weakening South East Asian economies has led to lower shipments from
Australia, especially to Ssang Yong (Korea) and General Motors (Indonesia). 
Both Brazil and Australia Automotive will be significantly down on 1996
results.  

Control Systems

Power Systems (formerly Batteries) Group and Metering Systems have shown
higher sales over 1996, with the majority of growth achieved in the US
operations.  This has offset the difficult trading conditions in Continental
Europe, particularly Germany, which affected both Power Systems and Flow
Control (formerly Valves) businesses. The strength of sterling has also
continued to have an adverse effect on the trading of certain UK companies in
this Group.

Three acquisitions in the second half of the year - Microlite (Brazilian
battery manufacturer, now trading as Hawker Saturnia), Limitorque (US actuator
manufacturer) and Exide Electronics - have positioned BTR Control Systems
Group for growth, and follow on from the Pollux acquisition in the first half.
 The Limitorque acquisition has complemented the Flow Control Group product
range, offering opportunities for additional actuator sales and a complete
package of pneumatic and electric control equipment systems.  The acquisition
of Exide, a leading independent supplier of uninterruptible power supply
systems (UPS) for US$585 million, establishes BTR as a world leader in the UPS
industry.  This acquisition emphasises BTRs focus on higher growth engineering
businesses, innovative product technologies and market leadership positions.

Power Drives

Sales growth in the Rexnord and Fasco Motors groups has been maintained,
although Fasco have experienced some softening of demand in the US,
particularly in the HVAC (Heating, Ventilation and Air-Conditioning) -
primarily weather related - and motor vehicle sectors.  Operational efficiency
at the Australian plants is being addressed through the implementation of a
number of cost reduction measures.

Brook Hansens European operations continue to be affected by currency-related
competition, a general slowdown in project activity and slow economic
conditions in Germany.  However, some recovery in the French market in recent
months has offset this effect. 

Specialist Engineering

Aerospace remains well ahead of 1996 in both sales and profits, as weaknesses
in the Australian operations are more than offset by strong order books and
margins elsewhere.  Paper Technology has continued to show sales and PBIT
growth over 1996, with strong order books in both the roll and clothing
segments.  The successful  launch of BTR Environmental Group as an integrated
business  focused on providing a global service is evidenced by sales growth
over 1996, with several large waste-handling orders won in emerging markets.

Rail Group has achieved sales growth over 1996, but there are considerable
increased costs being incurred relating to the development and introduction of
the next generation of signalling technology.   Nylex Malaysia has been
adversely affected by weaknesses in the Malaysian markets and the regions
economic slowdown.

DISPOSAL GROUP

BTRs disposal programme consists of two Phases.

The Phase 1 disposal programme of low growth, low return businesses announced
in September 1996 (representing some #2.3 billion of 1995 turnover) is 90%
complete. 

In the second phase, BTR announced in September 1997, that it would divest its
non-engineering businesses, Packaging & Materials, Building Products and
Polymeric Products, which represented #2.8 billion of 1996 sales.  These
businesses, though attractive in their own right, have few synergies with the
Engineering Group and are mostly regional businesses.  BTR believes these
businesses will have more value to others.

The disposal process is proceeding in line with expectations, and the majority
of the overall divestment programme is expected to be completed by the end of
1998.

Packaging & Materials

As identified in September, Packaging is reporting mixed results across its
sectors and geographic regions.  The UK glass operation is maintaining profit
growth, following continued capital and technology investment.  Plastic
packaging continues to show strong profit performances in the American and
Asia Pacific regions, with the American business experiencing stronger demand
following the improvement in the weather after a cold, wet summer.  Reported
sales remain adversely affected by the pass-through of falling resin prices.

Laminates Group has experienced a further decline in profitability, being
impacted by competitive pricing pressures in the American market, together
with production and cost inefficiencies.

Building Products

MBCI has continued to experience competitive pricing pressures, although
volumes have remained strong.  The Australasian building products businesses 
have continued their volume improvement.

Polymeric Products

The sale of the majority of the Polymeric Products businesses, together with
the Schlegel building products business, was announced in November 1997 for
#515 million to a management buy-out team backed by Legal & General Ventures
and Fuji Bank.

Of the remaining businesses, BTR Dunlop South Africa continues to experience
margin deterioration, although volumes have been maintained ahead of 1996
levels.  The remaining Australian polymer businesses have been adversely
affected by import penetration.

Finance Costs

Interest costs in the second half of 1997 are expected to be in line with the
cost incurred in the first half. 

Warrants and A shares

More than 99% of the 1997 warrant programme lapsed during October 1997.  For
the year the total conversions were 1.2 million shares with a cash receipt of
#3.1m.

On 27 November, BTR announced that the Board of BTR had decided to exercise
its right under the terms of the A shares to convert all outstanding A shares
into BTR Ordinary shares.  A circular to holders of A shares formally
notifying them of the Boards decision will be posted on Friday 12 December
1997.  Conversion will be effected on Saturday 13 December 1997 on the basis
of one BTR Ordinary share for each BTR A share held on that date. 
Approximately 52 million BTR Ordinary shares arising on conversion will be
allotted (representing an increase of approximately 1.3% to BTRs current
issued Ordinary Share Capital).  However, there will be no overall increase in
the Groups equity base.

Discontinued Activities

As a result of discontinued activities during the year and including the
Polymer Products businesses disposal, the current comparable 1996 full year
figures for continuing (as defined by UK Accounting Standards) sales would be
approximately #7.5 billion, and continuing operating profits #1.3 billion.  To
the extent that further disposals are made between now and the Preliminary
1997 Results announcement in March 1998, the comparative figures will continue
to change.

FTSE Industry Classification

At their December meeting, the FTSE Actuaries Industry Classification
Committee determined to reclassify BTR from the Diversified Industrials
subsector to Engineering - General.  Consequently, from January 1998, BTR will
be moved automatically to the Engineering - General sector.

For enquiries contact:

Investors, Analysts:
Kathleen ODonovan        BTR plc                    Tel: [phone]
David Robbie             BTR plc                    Tel: [phone]

Press:
Victoria Sabin           Brunswick                  Tel: [phone]


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