The Siebe engineering giant is cutting 4000 jobs in Britain, Europe and America as it plans further efficiency gains at a cost of #100m over the next two years.

Some 400 will go in the UK which chief executive Allen Yurko said was due to the cost of the pound, describing it as the world's strongest currency.

Pre-tax profits last year jumped 14.7% to #486m but this was below market expectations and the shares received a severe drubbing.

They tumbled 143p to 1365p wiping #730m off the market capitalisation to #6962m although that was also put down to the shares having had a very good run in the last two or three weeks.

There had been fears that the Far East crises would have had a major impact.

In the event, Siebe did manage an increase in profits - about 5.5% in organic terms compared with 1996-97's 15% in that region - but is now looking to other markets for growth as it does not expect any substantial recovery for another two years.

Yurko said that buying companies in the region is difficult as there is nothing of size that is of value - he reckons that Siebe has some #500m of immediate firepower available despite a capital expenditure programme that is increasing with a rise last year of #50m to #296m.

The impact of sterling on profitability was severe. It reduced the pre-tax total by #38.4m with the UK accounting for just over 9% of the total group sales of #3670m.

The dividend total is being raised by 1.5p to 16.2p which will be covered almost four times by earnings.

Because of the hefty share price, there will be a three for one scrip issue which will result in shareholders owning four shares for every one now held.

British Airways chairman Sir Colin Marshall will move up from being deputy chairman at Siebe to the top position and reversing the role with Sir Philip Beck who becomes his deputy on June 15.

There has been some unease as the appointment was seen as spreading Sir Colin's time too thinly as he has a raft of other senior appointments but he is soon retiring from the presidency of the CBI and will be spending one day a week at Siebe.

The best performances came from the temperature and appliance control and also the control systems divisions. Temperature was helped by the acquisition of Eaton Controls, which made Siebe the world's largest controls producer, and also the turn-up in demand for domestic appliances in Europe although trading in the Far East was tough. The purchase of the APV business last year which with the subsequent absorption now taking place of Wonderware, Simulation Sciences and Eurotherm has put the group, into the top position globally in process automation.

However there was a setback in industrial and safety equipment with the CompAir business in Britain hit by the sterling factor. Garage equipment, textiles and safety products are now up for sale.

Michael Blogg at brokers Charterhouse Tilney, who has a very high regard for the Siebe management, pointed to the medium term benefits of the accelerated re-structuring although it will hit profits short term.

He is expecting profits this year of around #610m and reckons that the shares should be bought on weakness.

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