Greycoat fights back with payout pledge

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The acrimonious battle between property developer Greycoat and one of its largest shareholders moved up a gear yesterday with the publication of first-half results and the promise of a 50 per cent dividend rise for the full year.

Greycoat used the issue of its interim figures to call on shareholders to reject a recent demand from Brian Myerson and Julian Treger's UK Active Value Fund that the company sell all its properties and return the proceeds to shareholders.

Peter Thornton, chief executive of Greycoat, said breaking the company up made no sense for three reasons: it would sacrifice the inherent growth potential of its central London development sites; it would hang a "closing down sale" sign over the company, reducing the prices it could raise through a disposal; and it would incur sizeable penalties for unwinding various financing hedges.

Greycoat's latest row with UK Active, which holds 10 per cent of the company's shares and which has been on the register since a rescue refinancing in 1993, was prompted two weeks ago when Mr Myerson and Mr Treger called on the company to break itself up as a means of narrowing the widening gap between its share price and the underlying value of its assets.

The gap between the value the market attributes to Greycoat's shares and the value of the properties it owns minus its debts is wider than for most of its peers. UK Active Value puts that down to poor management; the company blames concerns over the presence of a disgruntled shareholder on the register.

The move by UK Active Value has been widely seen as an attempt to highlight the value gap and flush out a possible bidder for the company rather than necessarily a genuine call for a break-up of the company. It is thought a number of property companies would be interested in buying Greycoat with perhaps three years of the current property cycle upturn remaining.

Announcing a 123 per cent rise in interim pre-tax profits from pounds 1.7m to pounds 3.8m, Greycoat promised a full-year dividend of 1.2p, a 50 per cent increase on last year's 0.8p payout. That in turn represented a 33 per cent rise over the previous year's dividend. The company does not pay an interim dividend.

UK Active Value responded to Greycoat's figures with a further condemnation of the company's record: "This is yet again more hollow promises of value to come. Shareholders should ask how the promised value will be delivered.

"It is three years since Greycoat was rescued by UKAV and in that time the company has failed to convince the market that it has a clear strategy for growth."