Hongkong fear triggers plunge at Trafalgar

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The Independent Online
Trafalgar House was locked in urgent negotiations with its advisers last night as its shares plunged to an all-time low. Frantic trading saw 70 million change hands, more than 10 times normal volume, as the market speculated that Hongkong Land, Trafalgar's largest shareholder, was poised to write off its pounds 300m investment in the troubled engineering to construction conglomerate.

The company is expected to issue a statement today to reassure investors about its financial position and the support of Hongkong Land. It is understood that there will be a brief trading update although full details are not expected before the December announcement of results for the year to September - when extensive balance-sheet write-downs are anticipated.

The shares closed 2.5p lower at 21p last night, at which point they have lost three-quarters of their value this year. Some deals yesterday were struck as low as 18p as investors scrambled to get out. The company's 6 per cent convertible preference shares fell 4.25p to 43p, at which point they notionally yield more than 17 per cent, indicating the market's scepticism that the coupon will ever be paid.

The crisis at the group, whose struggling subsidiaries include the Cunard line, has intensified in the past 10 days since the cash-raising disposal of the Ritz hotel to the secretive Barclay brothers was announced.

Although Trafalgar raised pounds 75m from the sale, that is expected to only match the loss that the group will announce in December. Trading has remained poor across the range of Trafalgar's operations. Analysts said yesterday they had been frustrated in their attempts to speak to the company recently and remained in the dark about its financial strength.

PDFM, the fund manager, which is rumoured to have been a heavy buyer of the shares on the way down, refused to comment on its position last night. It is believed to have been involved in an agency cross of 28 million shares yesterday.

Hongkong Land's frustration with its 26 per cent stake in Trafalgar follows its injection of more than pounds 300m since 1992. The stake was to have formed an insurance policy for Land's parent, Jardine Matheson, ahead of the Chinese takeover of Hong Kong in 1997, but it has proved a disastrous investment.

Writing off the investment will cause a serious loss of face for the Keswick family that controls Jardine Matheson, and for Nigel Rich, the former Hongkong Land managing director, parachuted into Trafalgar in September 1994 to turn the company around.

Yesterday's fall was the latest blow in a dreadful year for Trafalgar which has included the QE2's ill-fated refit cruise, the failed Northern Electric bid and losses for the six months to March of pounds 48m.