LONDON MARKETS: British Airways, Tomkins Climb In Flat London On<@SM>Cost Cuts

Two companies put in stellar share performances in London on Fridaymorning, as both British Airways and engineering firm Tomkins showed how cuttingcosts is boosting profits even after taking into account a weaker dollar.

British Airwaysshares rose 4% as investors welcomed a 75% jump in fiscalfirst-quarter profit, with the airline that's been fined for price fixing, ratedworst in losing bags and suffered the impact of toughened security restrictionssaying it's aggressively cut costs.

"We took steps last year that are paying off this year," said Willie Walsh,the airline's chief executive, on a call with journalists, pointing to a recentdeal on pensions and less severance costs than last year.

The company also benefited from lower commissions paid to travel agents and afavorable exchange rate that lowered fuel costs.

Meanwhile, Tomkinsshares shot up 12.6% after second-quarter sales andoperating profit both exceeded consensus analyst expectations by some way.

Sales at the FTSE 250 member dipped 6.1% to 764.6 million pounds, ahead of aconsensus forecast of 742 million pounds, while operating profit slid 11.8% to77.4 million pounds, ahead of a 68 million pound market consensus forecast.

Broker Cazenove, which upgraded the firm to in-line from underperform afterthe results, said that one of the key drivers of the better-than-expectedresults was cost cutting at the firm's air handling division, which supplies airconditioning, heating and ventilation systems in North America.

Tomkins said that cost cutting - alongside asset sales and tight cashmanagement -- helped it to face a continued deterioration in the U.S. automotiveoriginal equipment and residential housing markets during the period.

"Our management team continues to deal effectively with these challenges byfocusing on reducing the cost base and managing cash," Tomkins said.

Another challenge the company faces is a weaker U.S. dollar -which reducesrevenue translated back into sterling. The weaker dollar weighed on first halfresults and is expected to continue to do so for the rest of the year, Tomkinsnoted.

British Airways also sounded a note of caution about continued dollarweakness, cutting its fiscal-year sales forecast by 1% to around 4% to accountfor a weaker U.S. dollar and ongoing restrictions at its main London terminaldue to the tougher security measures.

More broadly, the U.K. FTSE 100 indexturned back from a positive start totrade down 0.2%, or 15.20 points, at 6,285.10 as investors across Europe waitfor some key jobs data from the U.S. later Friday.

Economists expect payroll growth of 133,000 in the July unemployment report,almost identical to the 132,000 jobs created in June.

Telecoms Vodafone Group (VOD) and BT Group (BT) were some of the weakestperformers , trading down more than 1% each in the top index.

Several other British companies reported earnings on Friday.

Shares in Royal Bank of Scotland Groupedged up 0.3% after the bank reported a19% rise in profit Friday, topping market expectations after strong growth fromits corporate and investment banking division and its wealth management arm.

And mining group Anglo American (AAUK) shares rose 2.85% as its first-half netprofit rose 14.8% to $3.38 billion following a strong performance from itsplatinum, base metals, ferrous metals and industrial minerals divisions.

Anglo American also said it's selling its tarmac division and announced a $4billion stock buyback.

(END) Dow Jones Newswires 08-03-07 0448ET Copyright (c) 2007 Dow Jones & Company, Inc.