FLATTER TOMKINS WARNS ON SLIP IN DIVIDEND GROWTH

CAKES-TO-BRAKES giant Tomkins today warned that its reputation for delivering at least 15% dividend growth - maintained for the past 15 years - could be under threat.

Speaking as the group disappointed the City with interim profits only 2.4% higher at GBP 220.1 million before tax and exceptionals, chairman Greg Hutchings said it would fall short of achieving its celebrated double-digit earnings growth in the year to 1 May.

While this was unlikely to threaten the dividend in the current financial year, he said its future could not be guaranteed. He said: "I don't think there will be any problems for the current year - you pay dividends out of cash and we have plenty of that. Beyond that, I honestly don't know. All I can say is that I would expect our dividend growth to continue being way above the average." The shares fell 13p to 228 1/2p as analysts cut their forecasts. Andrew Hollins at Dresdner Kleinwort Benson said he would be reducing his full-year estimate from GBP 520 million to a maximum of GBP 500 million. He expects dividend growth to slow to between 5% and 7% over the next two years. The interim dividend is lifted 14.3% this time to 4p. For the half-year ending 31 October, earnings per share rose 6.4% to 10.55p, still considerably above the 2% average the FT-SE All Share index, said Hutchings. Today's results, the first since Tomkins moved from the FT-SE's diversified industrials sector to engineering, were clouded by GBP 40 million provision to cover an expected loss on the sale of four flour mills. Tomkins was ordered to sell the mills by then-Trade Secretary Peter Mandelson in September, following the acquisition of six mills from Ireland's Kerry Group last year. Hutchings said Tomkins had hoped to avoid making a provision at this stage but had been obliged to because of new accounting stan- dards. He said the company could comfortably spend GBP 700 million on acquisitions and confirmed a potential interest in part of BTR's automotive division, should this be put up for sale. He said the future of Tomkins' leisure products arm, where the famous Smith & Wesson guns business was hit by a temporary "blip" in demand, would be made clear at the full-year results in July. Analysts said they were slightly surprised by a worse-than- expected performance in the automotive division, where profits were hit by cheap exports from the Far East and the General Motors strike in the US and were ahead 9% at GBP 77.8 million.

Copyright 1999
Provided by ProQuest Information and Learning Company. All rights Reserved.