Building groups to slash dividends

THREE of Britain's biggest building companies - Amec, George Wimpey and Taylor Woodrow - are expected to cut their dividends this week, as gloom deepens in a construction sector already ravaged by the housing slump and a sharp decline in commercial building.

Building shares have lost more than 65 per cent of their value relative to the rest of the market since the election, when hopes of a recovery were dashed. Analysts expect further sharp falls as the reporting season gets under way.

The cuts from Amec and Wimpey - both expected to reduce dividends from 4p to 2.5p - will be the biggest shock to the market. Amec, reporting on Thursday, raised pounds 110.6m in a rights issue at 200p a share last March - almost three times last week's closing price of 68p - and has between pounds 30m and pounds 40m of cash on its balance sheet. It is expected to announce pre-tax profits of pounds 10m, down from pounds 21.9m last time, which means the 2.4p of earnings will not cover even the reduced dividend. In 1991, it increased its dividend from 9.7p to 10.25p, despite losing pounds 9.9m before tax.

Wimpey, reporting on Tuesday, has been selling assets and restructuring its business, which helped it cut borrowings from pounds 372m to pounds 206.4m - 35 per cent of net assets - in 1991 and a further pounds 155m is due from the sale of Little Britain this year. It has never had a rights issue, so its dividend costs only pounds 30m, but the payment was not covered by earnings in either 1990 or 1991.

Until a few weeks ago both companies appeared determined to use their balance sheet strength to hold their interim payments, deferring a decision until the final results in March. Since then the climate has changed, partly because of BP's decision to slash its interim payment. Now the cuts have been so widely discounted by the market - Amec's yield would be 20 per cent if the dividend was maintained and Wimpey's 17.7 per cent - that a held dividend would be mistrusted and shares would probably be marked sharply lower.

The companies are also concerned about future dividend growth. Commercial construction is not expected to recover until at least 1994, while housing is likely to remain flat for some time. Unless dividends are cut sharply there will be little prospect of growth for some years.

Taylor Woodrow's dividend cut has been well-signalled. Colin Parsons, who took over as chairman earlier in the year, made it clear the 1991 payment was only maintained because his predecessor, Peter Drew, had promised that to shareholders when the company raised pounds 162.4m in a rights issue last April. Analysts expect the interim payment to fall from 1.86p to 1p when it reports on Wednesday as part of a cut from 9.5p to 2.5p for the full year.

Further ahead, John Mowlem is expected to make a second cut in its dividend when it reports later in the month. It faces a write-off of up to pounds 6m because of retentions on its management contracts at Canary Wharf, the Docklands development now in the hands of the administrators.

Although these are likely to be made at the full-year stage, analysts still expect am interim loss of pounds 10m from the group and a cut in the dividend from 5.65p to 2.5p. Last year, its payment was halved to 10.5p, a level it said it hoped would be sustainable.

News
people
News
people
Arts and Entertainment
Keys to success: Andrew and Julian Lloyd Webber
arts + entsMrs Bach had too many kids to write the great man's music, says Julian Lloyd Webber
Arts and Entertainment
Armstrong, left, and Bain's writing credits include Peep Show, Fresh Meat, and The Old Guys
TVBain and Armstrong have presented their unique view of 21st-century foibles in shows such as Peep Show and Fresh Meat
PROMOTED VIDEO
News
i100
Arts and Entertainment
Hand out press photograph/film still from the movie Mad Max Fury Road (Downloaded from the Warner Bro's media site/Jasin Boland/© 2014 Warner Bros. Entertainment Inc.)
films'You have to try everything and it’s all a process of elimination, but ultimately you find your path'
Arts and Entertainment
Imelda Staunton as Dolores Umbridge in the Harry Potter films
books

New essay by JK Rowling went live on Pottermore site this morning

News
Russia Today’s new UK channel began broadcasting yesterday. Discussions so far have included why Britons see Russia as ‘the bad guy’
news

New UK station Russia Today gives a very bizarre view of Britain

News
people

Top Gear presenter is no stranger to foot-in-mouth controversy

Arts and Entertainment
Keira Knightley and Benedict Cumberbatch at the premiere of The Imitation Game at the BFI London Film Festival
filmsKeira Knightley tried to miss The Imitation Game premiere to watch Bake Off
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

The benefits of Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

Trainee Recruitment Consultants

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Finance Assistant - Part time - 9 month FTC

£20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...

Marketing Manager

£40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...

Day In a Page

The drugs revolution starts now as MPs agree its high time for change

The drugs revolution starts now as MPs agree its high time for change

Commons debate highlights growing cross-party consensus on softening UK drugs legislation, unchanged for 43 years
The camera is turned on tabloid editors in Richard Peppiatt's 'One Rogue Reporter'

Gotcha! The camera is turned on tabloid editors

Hugh Grant says Richard Peppiatt's 'One Rogue Reporter' documentary will highlight issues raised by Leveson
Fall of the Berlin Wall: It was thanks to Mikhail Gorbachev that this symbol of division fell

Fall of the Berlin Wall

It was thanks to Gorbachev that this symbol of division fell
Halloween 2014: What makes Ouija boards, demon dolls, and evil clowns so frightening?

What makes ouija boards and demon dolls scary?

Ouija boards, demon dolls, evil children and clowns are all classic tropes of horror, and this year’s Halloween releases feature them all. What makes them so frightening, decade after decade?
A safari in modern Britain: Rose Rouse reveals how her four-year tour of Harlesden taught her as much about the UK as it did about NW10

Rose Rouse's safari in modern Britain

Rouse decided to walk and talk with as many different people as possible in her neighbourhood of Harlesden and her experiences have been published in a new book
Welcome to my world of no smell and odd tastes: How a bike accident left one woman living with unwanted food mash-ups

'My world of no smell and odd tastes'

A head injury from a bicycle accident had the surprising effect of robbing Nell Frizzell of two of her senses

Matt Parker is proud of his square roots

The "stand-up mathematician" is using comedy nights to preach maths to big audiences
Paul Scholes column: Beating Manchester City is vital part of life at Manchester United. This is first major test for Luke Shaw, Angel Di Maria and Radamel Falcao – it’s not a game to lose

Paul Scholes column

Beating City is vital part of life at United. This is first major test for Shaw, Di Maria and Falcao – it’s not a game to lose
Frank Warren: Call me an old git, but I just can't see that there's a place for women’s boxing

Frank Warren column

Call me an old git, but I just can't see that there's a place for women’s boxing
Adrian Heath interview: Former Everton striker prepares his Orlando City side for the MLS - and having Kaka in the dressing room

Adrian Heath's American dream...

Former Everton striker prepares his Orlando City side for the MLS - and having Kaka in the dressing room
Simon Hart: Manchester City will rise again but they need to change their attitude

Manchester City will rise again but they need to change their attitude

Manuel Pellegrini’s side are too good to fail and derby allows them to start again, says Simon Hart
Isis in Syria: A general reveals the lack of communication with the US - and his country's awkward relationship with their allies-by-default

A Syrian general speaks

A senior officer of Bashar al-Assad’s regime talks to Robert Fisk about his army’s brutal struggle with Isis, in a dirty war whose challenges include widespread atrocities
‘A bit of a shock...’ Cambridge economist with Glasgow roots becomes Zambia’s acting President

‘A bit of a shock...’ Economist with Glasgow roots becomes Zambia’s acting President

Guy Scott's predecessor, Michael Sata, died in a London hospital this week after a lengthy illness
Fall of the Berlin Wall: History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War

Fall of the Berlin Wall

History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War
How to turn your mobile phone into easy money

Turn your mobile phone into easy money

There are 90 million unused mobiles in the UK, which would be worth £7bn if we cashed them in, says David Crookes