Marley closes two factories and forecasts dividend cut

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The Independent Online
THE LENGTH and depth of the recession has forced Marley, the building materials company, to forecast that its full-year dividend will be cut by one-third. The company is also closing two factories with 200 job losses.

Marley makes and distributes bricks, tiles and plumbing parts, so it is affected by the dearth of house and office building.

Sir George Russell, chairman, was pessimistic about prospects for recovery. He said: 'Unless there is a miracle in demand we will have to cut the dividend.'

He added that it could be five years before there was need for further office building.

Sir George's comments came as Marley reported marginally improved pre-tax profits of pounds 9.7m for the six months to 30 June, up from pounds 9.3m. The company maintained its half-year payout at 2.1p.

However, the improvement stems from good performances overseas. Housebuilding and demand for Marley products has picked up in North America. It has also benefited from DIY enthusiasm in eastern Germany.

Demand for plastics for renovation work was stronger than demand for heavier goods. Sir George said people seemed to be improving their homes because they cannot move house.

Overseas markets contributed slightly more, but Marley also cut interest charges from pounds 6.2m to pounds 4.3m. Debt stands at pounds 100m, down from pounds 125m a year ago.

Sir George said that Britain was Marley's key market. The factory closures and redundancies are part of a continuing cost-cutting programme. One factory is in Manchester, the other in Blyth, Northumberland. Both plants make thermalite, large but light aerated concrete blocks.

The chairman said shareholders must shoulder some of the pain. 'We have cut everything else so now investors must take their share of the pressure,' he said.

Marley plans to match the 2.1p interim dividend with the same at the year end, making a 4.2p total against last year's total of 6p.

Stockbrokers forecast that Marley will make about pounds 20m in the full year, equivalent to earnings per share of 4.5p. If Marley achieves that the dividend will be covered for the first time since 1989.

However, closing the Manchester and Blyth factories and other reorganisation costs will result in full-year extraordinary charges of up to pounds 10m - half the predicted pre-tax profit.

In the half year under review Marley suffered a pounds 3.6m extraordinary charge as it settled a dispute with T Cowie, the car dealer, about the 1987 sale of a vehicle leasing subsidiary.

The shares fell 1p to 78p.

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