Losses hit shares at Mowlem: Cash call and sale of divisions follow slide into red

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The Independent Online
SHARES in John Mowlem fell 40p to 112p yesterday after the construction company and London City Airport owner plunged into a pounds 124.2m loss, launched a pounds 63m rights issue and put its house-building division up for sale.

John Marshall, the chief executive, said the changes would enable the company to focus on its core contracting and scaffolding operations. But analysts, who pointed out that Mowlem was in breach of its borrowing covenants, described the cash call as an attempt to rescue the company.

The loss was struck after a pounds 49m goodwill write-off following the disposal of HSS, the plant hire operation. There was also a pounds 50m exceptional charge to cover asset write- downs and restructuring costs.

Even before the exceptional charges, all four operating divisions made losses. Contracting and the City Airport were hardest hit, losing pounds 4m and pounds 4.8m respectively. Scaffolding and house building both lost pounds 600,000.

Mr Marshall said that Mowlem could not afford to fund the working capital that would be needed by the homes division if it were to take advantage of the recent improvement in the residential property market. He hoped to sell it for at least its net asset value of pounds 28m.

The London City Airport is also up for sale, although the introduction of a Virgin flight to Dublin has helped to increase passenger numbers to near the airport's break-even level.

Although trading conditions remained tough in the contracting division, the core UK construction operations generated a profit of pounds 11.9m from sales of pounds 703m. Those were offset by losses on several contracts in mechanical engineering.

SGB Youngman, the UK plant hire and sale business, made pounds 3.2m against pounds 200,000.

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