Large losses at Taylor Woodrow: Problem contracts affect building group

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The Independent Online
PROVISIONS on three large contracts, together with property and housing write-downs, made Taylor Woodrow the latest in a series of builders to show a sharp increase in losses for 1992.

The group made a pounds 66.1m pre-tax loss, up from pounds 2.7m. The dividend was slashed from 9.5p to 1p, half of which was paid at the interim stage. The pounds 4.2m cost had to be transferred from reserves.

The three problem contracts accounted for more than a third of the losses. The Storebaelt tunnel in Denmark required a pounds 6.5m provision, down from pounds 13m a year ago, and there was a further pounds 8.5m provision against the Channel tunnel. The group refused to disclose the provision on Euro Disney, where it was one of the main contractors, but analysts estimate it was almost pounds 9m, up from pounds 3.8m in 1991.

These write-offs, coupled with a pounds 10m loss on its structural steel business, meant losses in the contracting division rose from pounds 19.6m to pounds 32.5m. Tony Palmer, chief executive, said controls over the contracting business had now been tightened - all tenders of a certain size have to be approved by directors.

The international business has halved in size, new management has been installed and the number of areas in which it can operate reduced to four. It has also decided to withdraw from structural steel and has charged pounds 23.8m as an extraordinary item to cover the closure.

Exceptional write-downs increased from pounds 46.5m to pounds 66.4m, of which pounds 37.8m was against properties and the remainder on its housing land bank. Profits from housing - with improved figures in Australia, Canada and the US - were offset by increased losses in Britain.

Profits from property development fell 60 per cent to pounds 17.2m as gains on disposals fell. The amount of interest charged to developments fell from pounds 5.5m to pounds 1m.

Borrowings rose pounds 156m to pounds 228.6m, but net assets declined from pounds 677m to pounds 525m because of the retained losses and a deficit of about pounds 80m on revaluation of investment properties. That meant debt as a proportion of net assets rose from 23 per cent to 43.5 per cent.

Colin Parsons, who took over as chairman a year ago, said: 'I am sure that Taylor Woodrow has now turned the corner.' The City welcomed his confidence and the shares closed 4p higher at 88p.