French losses and strong pound cost Redland dear

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The Independent Online
Appalling winter weather, the sale of its brick interests, strong sterling and stagnant economies in France and Germany conspired to send Redland's profits tumbling last year.

The poor figures were expected by the City, however, and Redland's shares, barely more than half their level three years ago, recovered 6.5p to close at 360p last night.

Robert Napier, chief executive, promised a resolution of its problems in France, where Granulats, the aggregates and road surfacing contractor bought as part of 1992's disastrous Steetley acquisition, continues to haemorrhage cash. Redland is talking to a number of potential purchasers of the business, which slipped into the red last year, and expects to announce a deal before the summer.

Pre-tax profits before exceptional items plummeted from pounds 355m to pounds 259m in the 12 months to December, a year of great strategic change at Redland in which it merged its European roof tile operations with those of associate Braas and sold its brick business to Ibstock.

After a goodwill write-off on the brick sale of pounds 75m, reported profits emerged at pounds 200.9m (pounds 273.2m). The strength of the pound cost Redland pounds 7m in the year and Mr Napier said that if the results had been translated at today's exchange rate they would have been pounds 25m lower.

Earnings per share were 21.6p (30.6p), allowing a same again full-year dividend payout of 16.7p. Redland cut its dividend from 25p in 1994 after years of struggling to maintain the payout following its pounds 1bn acquisition of Steetley, a deal the group admits it overpaid for.

Redland denied speculation yesterday that the imminent sale of its French operations would herald further asset sales or even a break-up of the group. Mr Napier said, "We believe we can create value for shareholders through the actions we have already implemented, including the consolidation of our building interests in Germany and the proposed sale of Granulats."

Analysts have put a break-up value of between 355p and 415p on Redland, which Mr Napier said was not sufficiently higher than the current share price to warrant the expense of a demerger. The decision to sell the French businesses follows a difficult year in which the operations reversed a pounds 10m profit into an pounds 8m loss. Around 360 jobs were lost at Granulats in the year and total employee numbers have fallen from 4,000 four years ago to about 2,500.

Net assets in France amount to about pounds 310m, but analysts remain sceptical about Redland's chances of realising much more than about pounds 240m for the businesses.