Cannon Street plunges deeper into the red

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The Independent Online
CANNON STREET Investments, the mini-conglomerate where the former Isosceles chief David Smith recently took control, will stun investors on Wednesday by announcing full-year losses of more than pounds 60m.

The plunge even further into the red - the group lost pounds 34.9m last year - will wipe out nearly half of the group's net worth, raising questions about its financial stability.

However, Mr Smith is expected to tell investors that the group's debt - which has been reduced from more than pounds 100m to about pounds 30m - is now under control and its bankers, led by Bank of Scotland, are supportive. The losses mean that the group has no reserves left to pay dividends to either its ordinary shareholders or to holders of its convertible preference shares, most of which belong to Bank of Scotland. The group has already had one capital restructuring and it is hoped that Mr Smith will be able to avoid another.

The losses have been caused mainly by massive write-offs on Cannon Street's disparate business interests. The group has also suffered losses on disposals made during the past year as Mr Smith, his assistant Liz Hignell, who is acting finance director, and his predecessor Robin Binks, the former corporate financier at SG Warburg, have battled to save the group from collapse.

During 1992 the group realised more than pounds 60m from disposals, the largest of which was the flotation of the house-building group Avonside in February, a deal criticised by some in the City for the large fees paid to advisers, including SG Warburg.

The group then sold its residual holding in Betacom, which Cannon Street floated in the late 1980s, to Amstrad, realising pounds 1.5m. It has also sold its laundry business for pounds 4m, some of its electrical businesses for pounds 12m and its building operation for which it received 3.5 million shares in the builder Bimec.

It has also had to put Olivers Windows into liquidation, and two other double-glazing companies into receivership.

Investors will be hoping for some signs of stability. These are likely to come from a recovery in trading at Cannon Street's leisure operations, which include the prestigious Craigendarroch and Cameron House hotels in Scotland.

Cannon Street's shares, which stood at more than 300p in the group's heyday five years ago, slumped to just 2.25p at the end of last year, but have stabilised to close at 10.5p on Friday.

(Photograph omitted)