Housing slump knocks Caradon profits

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The Independent Online
Caradon, the Everest double glazing to Mira showers building products group, yesterday warned that it would continue to review its capacity as it confirmed that troubled housing markets had caused a slump in profits for last year.

But further serious job losses beyond the 1,630 already announced are not expected. Caradon's chief executive, Peter Jansen, said: "The difficulty is in forecasting the UK market, where we have 50 per cent of our business. The general view is that while the first half will be difficult, the second half will show signs of recovery."

There had been no improvement in the early months of the year, he said, but it was difficult to call because the bad weather had kept the industry busy with emergency work such as burst pipes.

After a flat year for housing starts in the US, Mr Jansen said, "things are now getting better and our businesses are performing accordingly". But in Germany, where Caradon paid over pounds 100m for a half-share in the Weru doors and windows manufacturer last year, the picture continues to be gloomy. Housing activity is expected to be weak in 1996, although Mr Jansen insisted that the group remained very pleased with Weru, which remained a central part of its strategy.

Restructuring delivered pounds 25m of cost savings last year and Caradon expects an accelerated programme begun in September to deliver a further pounds 25m in the current year, making pounds 50m in all. But despite the company's efforts, pre-tax profits slumped from pounds 201m to pounds 114m in the year to December. The dividend for the year is held at 9.5p, after a final of 6.6p. The shares added 1p to 204p.

The results were hit by a pounds 27.6m restructuring charge in the original operations, of which pounds 12.9m related to the plumbing division and pounds 5.6m fell in the electrical business centred on MK Electric, the UK's leading plugs and sockets manufacturer. A further pounds 4.5m provision was taken in Weru, which announced last month that it would cut 170 jobs at its factory near Stuttgart.

Without Weru, Caradon's figures would have looked much worse. It contributed pounds 12m in its first eight months with the group, just enhancing earnings, but that was insufficient to offset pounds 15.5m losses from doors and windows in the US. Apart from the 7 per cent fall in US housing starts, the deficit was exacerbated by pounds 8m of one-off costs at the Better-Bilt subsidiary due to the introduction of a new computer system.

Mr Jansen said he believed there was "nothing to worry about" from the continuing Department of Trade and Industry investigation into unusual dealings in the group's shares prior to a profits warning that accompanied the interim results in September. He refused to comment further as the matter was sub judice.

He said there were no immediate plans to buy out the minority in Weru, nor to dispose of the security printing operation, which saw profits dip pounds 1m to pounds 38m last year.